EXHIBIT 13

Five-Year Comparative Summary

|                                                        |                                                                 | Fiscal Year Ended |       
|------------------------------------------------------- | --------------------------------------------------------------- | ----------------- | ------
|
|
|Consolidated Summary of Operations                      |                                                                 |                   |       
|Net sales                                               |                                                                 | $                 | 939.3 
|Cost of goods sold                                      |                                                                 |                   | (755.3
|Selling, general and administrative                     |                                                                 |                   | (110.8
|Unusual items                                           |                                                                 |                   |      
|Interest, net                                           |                                                                 |                   | (24.5 
|Loss on cancellation of debt offering                   |                                                                 |                   |      
|Other income (expense), net                             |                                                                 |                   | (4.7  
|                                                        |                                                                 |                   |       
|Earnings from continuing operations before income taxes |                                                                 |                   | 44.0  
|Income taxes                                            |                                                                 |                   | (16.3 
|                                                        |                                                                 |                   |       
|Earnings (loss) from continuing operations              |                                                                 |                   | 27.7  
|                                                        |                                                                 |                   |       
|Discontinued operations:                                |                                                                 |                   |       
|                                                        | Operating earnings (loss), after tax                            |                   |       
|                                                        | Cumulative effect of change in accounting principle, net of tax |                   |       
|                                                        | Net loss on disposition, after tax                              |                   |       
|                                                        |                                                                 |                   |       
|Earnings (loss) from discontinued operations            |                                                                 |                   | (73.7 
|                                                        |                                                                 |                   |       
|Net earnings (loss)                                     |                                                                 | $                 | (46.0 
|                                                        |                                                                 |                   |       
|Basic earnings (loss) per share:                        |                                                                 |                   |       
|                                                        | Continuing operations                                           |                   | $     
|                                                        | Discontinued operations                                         |                   |       
|                                                        |                                                                 |                   |       
|                                                        |                                                                 | Total             |       
|                                                        |                                                                 |                   |       
|Diluted earnings (loss) per share:                      |                                                                 |                   |       
|                                                        | Continuing operations                                           |                   | $     
|                                                        | Discontinued operations                                         |                   |       
|                                                        |                                                                 |                   |       
|                                                        |                                                                 | Total             |       
|                                                        |                                                                 |                   |       
|Year-End Financial Position                             |                                                                 |                   |       
|Current assets(3)                                       |                                                                 | $                 | 216.0 
|Current liabilities(3)                                  |                                                                 |                   | 147.0 
|Working capital (excluding cash and short-term debt)(3) |                                                                 |                   | 84.2  
|Property, plant and equipment, net(2)                   |                                                                 |                   | 235.1 
|Long-term debt                                          |                                                                 |                   | 328.0 
|Shareholders' equity                                    |                                                                 |                   | 236.0 
|Total assets(3)                                         |                                                                 |                   | 766.3 
|                                                        |                                                                 |                   |       
|Dividends Paid                                          |                                                                 |                   |       
|Common stock                                            |                                                                 | $                 |      
|Per share of common stock                               |                                                                 |                   |      
|                                                        |                                                                 |                   |       
|Other Financial Data                                    |                                                                 |                   |       
|Current ratio                                           |                                                                 |                   | 1.5:1 
|Equity per share of common stock                        |                                                                 | $                 | 12.30 
|Debt-to-total capitalization                            |                                                                 |                   | 59    
|Depreciation(2)                                         |                                                                 | $                 | 13.6  
|Capital expenditures, excluding acquisitions(2)         |                                                                 | $                 | 33.0  
|Average common shares outstanding:                      |                                                                 |                   |       
|                                                        | Basic                                                           |                   |       
|                                                        | Diluted                                                         |                   |       
|Number of common shareholders                           |                                                                 |                   | 3,970 
|Number of employees(2)                                  |                                                                 |                   | 2,377 
|Market price per share of common stock:                 |                                                                 |                   |       
|                                                        | Close                                                           |                   | $     
|                                                        | High                                                            |                   | $     
|                                                        | Low                                                             |                   | $     

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND RESULTS OF OPERATIONS

OVERVIEW

International Multifoods Corporation is a North American producer of branded consumer foods and foodservice products, including baking mixes, frozen bakery
products, flour, ready-to-spread frostings, condiments, and potato and pancake mix offerings. We manage the company through three operating segmentsU.S. Consumer
Products, Foodservice Products and Canadian Foods.

In
September 2002, we sold our foodservice distribution business for $166 million in cash to Wellspring Distribution Corp. The foodservice distribution business is
classified as discontinued operations in the consolidated financial statements and in the following management discussion and analysis.

In
November 2001, we completed the acquisition of the Pillsbury desserts and specialty products business, the Pillsbury non-custom foodservice baking mix and frosting
business, and certain regional flour and side-dish brands of General Mills. The acquisition makes International Multifoods a leading marketer of U.S. consumer baking products and enhances
our existing U.S. foodservice manufacturing business.

During
fiscal 2003, we completed our transformation into a branded food company, which we believe will provide higher returns to our shareholders in the years ahead. We completed the
integration of the businesses that we acquired in November 2001, and we began producing consumer baking mixes at a manufacturing facility in Toledo, Ohio, that we purchased as part of the
acquisition. The transformation also included the sale of the foodservice distribution business, which allows us to focus our resources and energies on branded food products and prepare for future
growth. The sale also allowed us to strengthen our balance sheet, as we were able to use the proceeds from the sale to substantially reduce our debt obligations.

RESULTS OF OPERATIONS

Fiscal 2003 compared with Fiscal 2002

Continuing operations

Overview

Consolidated
net sales for fiscal 2003 increased $341.4 million, or 57%. This increase was primarily driven by the full year contribution from the acquired Pillsbury and General
Mills businesses. Excluding sales from the acquired businesses, net sales increased 4% in fiscal 2003.

Earnings
from continuing operations in both fiscal 2003 and 2002 were affected by one-time costs and unusual items. Fiscal 2003 earnings included a $4.7 million
pre-tax loss associated with the early repayment of debt obligations. In fiscal 2002, one-time costs included a $10.3 million write-off of fees related to
the planned issuance of $200 million of high-yield unsecured notes. We canceled the debt offering as more favorable financing became available when, as part of the acquisition,
Diageo plc agreed to guarantee $200 million of our debt obligations. Information on unusual items recognized in fiscal 2002 is included in our discussion of Segment Results.

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The
following table presents the after-tax impact of one-time and unusual items on earnings from continuing operations and diluted earnings per share for fiscal
2003 and 2002.

|                                  |                                       | Earnings from
Continuing Operations |      | Diluted Earnings
per Share |  
|--------------------------------- | ------------------------------------- | ----------------------------------- | ---- | -------------------------- | -
|
|
|Before one-time and unusual items |                                       | $                                   | 30.7 |                            | $
|                                  | Loss on early repayment of debt       |                                     |      | (3.0                       | )
|                                  | Loss on cancellation of debt offering |                                     |      |                           |  
|                                  | Unusual items                         |                                     |      |                           |  
|                                  |                                       |                                     |      |                            |  
|Reported amounts                  |                                       | $                                   | 27.7 |                            | $
|                                  |                                       |                                     |      |                            |  

The
significant increase in earnings from continuing operations was driven by the earnings contribution from the acquired businesses. The earnings increase was partially offset by higher
interest expense, which reflects the additional debt we incurred for the acquisition.

Earnings
from continuing operations in both fiscal 2003 and 2002 included income from our defined benefit pension plans. Strong investment performance in the 1990s significantly
increased our pension assets, which resulted in recognition of pension income. However, the value of our pension assets declined $18.5 million in fiscal 2002, primarily due to a decline in the
equity markets in 2001 and the payment of benefits. In fiscal 2003, pension assets declined an additional $53.7 million as a result of continued poor performance in the equity markets, benefit
payments to retirees and payments to employees of our foodservice distribution business who received lump-sum payments when the business was sold. The decline in the value of pension
assets is expected to substantially reduce pension income in fiscal 2004. Currently, we estimate that net pension income will be approximately $0.5 million to $1 million in fiscal 2004.
Despite the decline in pension assets, our qualified defined benefit pension plans were fully funded at the end of fiscal 2003. See Note 16 to the consolidated financial statements for
additional information on our pension plans.

Segment
Results

U.S. Consumer Products

|                   |  | 2003 |       | 2002 |  
|------------------ |  | ---- | ----- | ---- | -
|
|Net sales          |  | $    | 413.0 |      | $
|Operating earnings |  |      | 56.4  |      |  
|Operating margin   |  |      | 13.7  | %    |  

This
business segment was formed in fiscal 2002 as a result of our acquisition of certain retail brands of The Pillsbury Company and General Mills. The operating results of the acquired
brands are included in our results since Nov. 13, 2001 (the date of acquisition).

Net
sales were $413 million, compared with $109.7 million last year. On a comparable pro forma basis, assuming we owned the retail brands for all of fiscal 2002, unit
volume increased about 3%. The increase in comparable unit volume is the result of success in non-traditional channels, such as mass merchandisers, dollar stores and limited assortment
formats, new product introductions, and new marketing and merchandising programs.

Fiscal
2003 operating earnings of $56.4 million benefited from higher sales volume that was driven by new product introductions and merchandising programs, but were adversely
affected by significant

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competitive
activity and higher commodity costs. High commodity costs are also expected to unfavorably impact earnings in the first quarter of fiscal 2004.

Foodservice Products

|                                             |  | 2003 |       | 2002 |  
|-------------------------------------------- |  | ---- | ----- | ---- | -
|
|Net sales                                    |  | $    | 228.6 |      | $
|Operating earnings                           |  |      | 6.2   |      |  
|Operating margin                             |  |      | 2.7   | %    |  
|Unusual items included in operating earnings |  |      |      |      |  

Net
sales increased 6% to $228.6 million as a result of the full-year contribution of the acquired Pillsbury foodservice business. Excluding the acquired business,
sales declined approximately 4%. The decline was primarily the result of lower baking mix volumes and continued softness in the foodservice industry.

Operating
earnings increased 51% to $6.2 million, due to the earnings contribution from the acquired Pillsbury business. The increase in operating earnings was partially offset by
the impact of lower baking mix sales volumes, higher commodity costs and a loss we incurred when a supplier filed for bankruptcy. In addition, operating earnings comparisons were impacted by a
$0.9 million unusual charge recorded last year that was associated with the reorganization of our sales force and efforts to reduce manufacturing overhead expense. The unusual charge was
primarily for severance costs associated with the departure of 23 employees.

Canadian Foods

|                                             |  | 2003 |       | 2002 |  
|-------------------------------------------- |  | ---- | ----- | ---- | -
|
|Net sales                                    |  | $    | 297.7 |      | $
|Operating earnings                           |  |      | 22.1  |      |  
|Operating margin                             |  |      | 7.4   | %    |  
|Unusual items included in operating earnings |  |      |      |      |  

Net
sales increased 9% to $297.7 million, primarily due to higher selling prices that resulted from higher commodity costs. Unit sales volumes increased approximately 1%, as a
result of growth in commercial flour, consumer condiments and export products, partially offset by unit volume declines in commercial baking mixes and consumer flour. A new product offering introduced
last year drove the increase in consumer condiments unit volume. The decline in commercial baking mix sales was primarily the result of a large customer transitioning to a frozen product format.
Consumer flour volumes were affected by competitive activities.

Operating
earnings comparisons were impacted by a $1.5 million unusual gain recorded in fiscal 2002 that resulted from the sale of our condiments-processing facility in
Scarborough, Ontario. The sale was part of a plan to consolidate our condiments-processing operations in Dunnville, Ontario. Excluding the unusual net gain, operating earnings declined by
$0.8 million as a result of lower consumer flour volumes and higher plant costs. In addition, operating earnings in both fiscal years were affected by costs and inefficiencies that resulted
from our condiments facility consolidation project.

Non-Operating
Expense and Income

In
fiscal 2003, net interest expense was $24.6 million, compared with $11.6 million in the prior year. The increase was primarily due to the debt we incurred in
November 2001 to finance the

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acquisition
of the Pillsbury and General Mills businesses. The increase was partially offset by lower average borrowing rates on our variable rate debt obligations.

In
fiscal 2002, we wrote off $10.3 million of underwriting and other direct costs associated with the planned issuance of $200 million in high-yield unsecured
notes. We canceled the debt offering as more favorable financing became available when, as part of the acquisition, Diageo plc agreed to guarantee $200 million of our debt obligations.

In
fiscal 2003, we recorded a $4.7 million charge associated with the early repayment of term loans, which is classified as other income (expense), net in the consolidated
statement of operations.

Other
income (expense), net in fiscal 2002 included a $0.9 million gain from the sale of Prudential Financial, Inc. (Prudential) common stock. We received the common stock
as part of Prudential's conversion from a mutual company to a stock company. In addition, we also recorded a charge of $0.7 million for direct costs incurred for the early redemption of
outstanding medium-term notes and the write-off of unamortized bank fees that resulted from the refinancing of our debt facilities.

Income
Taxes

For
fiscal 2003, our overall effective tax rate was 37%, compared with 33.2% last year. Last year's effective tax rate was affected by a low income tax rate on the gain from the sale of
our condiments facility in Canada.

Fiscal 2002 compared with Fiscal 2001

Overview

Earnings
from continuing operations in fiscal 2002 were affected by one-time costs related to the acquisition and unusual items. One-time costs in fiscal 2002
included a write-off of $10.3 million for fees related to the planned issuance of $200 million of high-yield unsecured notes. Information on unusual items
recognized in fiscal 2002 is included in our discussion of Segment Results. In fiscal 2001, we recorded tax expense associated with a dividend from our Canadian subsidiary and recognized an unusual
gain from the sale of our corporate headquarters building in Minnesota. The following table presents the after-tax impact of one-time and unusual items on earnings from
continuing operations and diluted earnings per share for fiscal 2002 and 2001.

|                                  |                                       | Earnings from
Continuing Operations |      | Diluted Earnings
per Share |  
|--------------------------------- | ------------------------------------- | ----------------------------------- | ---- | -------------------------- | -
|
|
|Before one-time and unusual items |                                       | $                                   | 11.4 |                            | $
|                                  | Loss on early repayment of debt       |                                     |      | (0.5                       | )
|                                  | Loss on cancellation of debt offering |                                     |      | (6.4                       | )
|                                  | Tax on Canadian dividend              |                                     |      |                           |  
|                                  | Unusual items                         |                                     |      | 0.5                        |  
|                                  |                                       |                                     |      |                            |  
|Reported amounts                  |                                       | $                                   | 5.0  |                            | $
|                                  |                                       |                                     |      |                            |  

The
decline in earnings before one-time and unusual items was primarily the result of lower operating earnings in our Foodservice Products and Canadian Foods businesses. We
also had higher interest expense, which resulted from higher debt balances related to the acquisition. Our Foodservice Products business was affected by higher fixed manufacturing and ingredient
costs, while Canadian Foods was impacted by costs incurred to consolidate our condiments-processing facilities. The earnings decline was partially offset by the earnings contribution from the acquired
businesses.

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Segment
Results

U.S. Consumer Products

|                   |  | 2002 |       | 2001
|------------------ |  | ---- | ----- | ----
|
|Net sales          |  | $    | 109.7 |     
|Operating earnings |  |      | 12.3  |     
|Operating margin   |  |      | 11.2  | %   

This
business segment was formed in fiscal 2002 as a result of our acquisition of certain retail brands of The Pillsbury Company and General Mills. The operating results of the acquired
brands are included in our results since Nov. 13, 2001 (the date of acquisition).

Foodservice Products

|                                             |  | 2002 |       | 2001 |  
|-------------------------------------------- |  | ---- | ----- | ---- | -
|
|Net sales                                    |  | $    | 215.8 |      | $
|Operating earnings                           |  |      | 4.1   |      |  
|Operating margin                             |  |      | 1.9   | %    |  
|Unusual items included in operating earnings |  |      | (0.9  | )    |  

Net
sales increased 10% to $215.8 million. Excluding the acquired Pillsbury foodservice business, sales increased approximately 6%, primarily as a result of the addition of a
large new customer account that we began to serve in the fourth quarter of fiscal 2001.

Operating
earnings declined 62% to $4.1 million. This decline was driven by higher ingredient costs and increased fixed manufacturing expense, which resulted from the addition of
new production lines for our ready-to-bake and thaw-and-serve products. Competitive pricing pressures and soft volumes in regional accounts also
adversely affected our results. Partially offsetting these factors was the earnings contribution from the acquired Pillsbury business.

As
a result of the acquisition, we reorganized our Foodservice Products sales force. We also took steps to reduce our foodservice manufacturing overhead costs. As a result of these
actions, we recorded a $0.9 million unusual charge in fiscal 2002 for severance costs associated with the departure of 23 employees.

Canadian Foods

|                                             |  | 2002 |       | 2001 |  
|-------------------------------------------- |  | ---- | ----- | ---- | -
|
|Net sales                                    |  | $    | 272.4 |      | $
|Operating earnings                           |  |      | 24.4  |      |  
|Operating margin                             |  |      | 9.0   | %    |  
|Unusual items included in operating earnings |  |      | 1.5   |      |  

Net
sales declined 1% to $272.4 million. Lower consumer grain-based and foodservice condiments volumes and unfavorable currency translation negatively impacted net sales. This
decline was partially offset by higher grain-based product prices resulting from increased commodity costs.

Operating
earnings declined 13% to $24.4 million. Operating earnings were adversely affected by costs and inefficiencies resulting from our condiments facility consolidation
project, as well as lower sales volumes, higher raw material costs and unfavorable currency translation.

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In
fiscal 2002, we completed the sale of our condiments-processing facility in Scarborough, Ontario, as part of a plan to consolidate our condiments-processing operations in Dunnville,
Ontario. We recognized a $1.8 million gain on the sale of the building and a $0.3 million charge for additional employee termination and facility closing costs. In fiscal 2001, we
recorded an unusual charge of $1.8 million for severance costs for 174 employees of the Scarborough plant. Certain costs related to the project, including employee and equipment relocation
expenses, were not included in the unusual charge. These expenses, which were included in general and administrative expenses and recognized when incurred, totaled $1.6 million in fiscal 2002
and $0.7 million in fiscal 2001.

Corporate

In fiscal 2001, we recognized an unusual gain of $5.8 million from the sale of our corporate headquarters building in Minnesota. We also recognized
severance costs of $0.2 million for corporate staff reductions.

Non-Operating
Expense and Income

In
fiscal 2002, net interest expense was $11.6 million, compared with $4.2 million in the prior year. The increase in net interest expense was due to higher average debt
balances related to the acquisition and increased working capital levels. The increase was partially offset by lower average borrowing rates on our variable rate debt obligations.

Income
Taxes

For
fiscal 2002, our overall effective tax rate was 33.2%, compared with 47.4% in fiscal 2001. Our effective tax rate in fiscal 2001 was affected by income tax expense of
$3.1 million associated with a dividend from our Canadian subsidiary.

Discontinued operations

On Sept. 9, 2002, we sold our foodservice distribution business for $166 million in cash to Wellspring Distribution Corp. We recorded a net
after-tax loss of $25.9 million on the disposition.

Our
discontinued foodservice distribution business had a pre-tax operating loss of $8.8 million ($6.5 million after tax) in fiscal 2003. Operating results
included a $5.2 million pre-tax loss from the curtailment and settlement of pension obligations, resulting from the sale of the business. In addition, we recorded a
$3.7 million pre-tax charge primarily for severance costs.

As
a result of our adoption of Statement of Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets," we recorded a cumulative effect of a change in accounting
principle of $41.3 million to write off the goodwill associated with the foodservice distribution business. See additional discussion in Note 8 to the consolidated financial statements.

Subsequent events

On April 1, 2003, we announced that we are taking actions to reduce the cost structure and improve the financial performance of our Canadian Foods and
Foodservice Products businesses. This includes reorganizing our Canadian Foods business to reduce selling and administrative expenses and reducing production at our Foodservice Products plant in
Sedalia, Missouri. These actions will result in a net reduction of approximately 100 full-time positions. We currently expect to recognize an unusual pre-tax charge of up to
$3.5 million in the first quarter of fiscal 2004 and an annual pre-tax benefit of approximately $2 million from these actions, half of which will be recognized in fiscal
2004.

On
April 1, 2003, Fleming Companies, Inc. filed for bankruptcy protection under Chapter 11. Substantially all accounts receivable that were due from Fleming at fiscal year
end were collected as of

7

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the
date of the bankruptcy filing. We are in the process of assessing whether we will be able to fully collect amounts due from Fleming for sales that we made subsequent to our fiscal year end. We
currently believe that the loss, if any, from our inability to collect amounts due to us will not exceed $2 million.

FINANCIAL CONDITION

Our major sources of liquidity are cash flows from operations and borrowings from our $100 million revolving credit facility. As of March 1, 2003,
$15.1 million of borrowings were outstanding under the revolving credit facility. In addition, $8.4 million of the facility was unavailable due to outstanding letters of credit.

We
believe that cash flows from operations and borrowings from our existing revolving credit facility will be sufficient to meet our operating requirements and debt service obligations
in fiscal 2004. However, our future financial performance could be impacted by a change in general economic or competitive conditions or other unforeseen events that are beyond our control. If our
earnings were adversely affected by such factors or events, we could violate our debt covenants. In the event that such noncompliance appears likely, or occurs, we would seek the lenders' approvals of
amendments to, or waivers of, such financial covenants.

As
a result of the debt repayments we made with the proceeds from the sale of the foodservice distribution business, our debt-to-total-capitalization ratio
declined to 59% at March 1, 2003, compared with 66% at March 2, 2002.

Capital
Resources

In
fiscal 2002, we entered into a $450 million senior secured credit facility with a syndicate of banks, financial institutions and other entities, and issued $200 million
of senior unsecured notes. We applied the proceeds from borrowings under the new credit facilities to pay for the acquisition, refinance our existing debt, and pay fees and expenses related to the
refinancing of our indebtedness.

The
$450 million senior secured facility was composed of a $100 million revolving credit facility that expires on Sept. 30, 2006, a $150 million amortizing
Term A loan facility and a $200 million amortizing Term B loan facility. During fiscal 2003, we used the proceeds from the sale of our foodservice distribution business and available cash
balances to repay $210 million of the term loans.

The
interest rates on borrowings under the senior secured facility are variable and based on current market interest rates plus a spread based on our leverage. The credit agreement
contains covenants that restrict dividend payments, limit capital expenditures and require the maintenance of leverage, interest coverage and fixed charge coverage ratios. Some of the covenants become
more restrictive over time. Borrowings under these facilities may be used for general corporate purposes. The facility is secured by substantially all our assets.

In
November 2001, we entered into interest rate swap agreements in order to fix a portion of our variable rate borrowings. The interest rate swap agreements were for terms of
1.5 years, 2 years and 3 years for notional amounts of $50 million, $25 million and $25 million, respectively. The fixed pay rates on the swaps are 2.81%,
3.33% and 3.93%, respectively, and we receive the three-month LIBOR rate.

The
$200 million senior unsecured notes mature on Nov. 13, 2009, and have an interest rate of 6.602%, payable annually. In anticipation of the issuance, we entered into an
interest rate swap agreement that, when terminated, had the effect of adjusting the effective interest rate of the notes to 5.97%. The senior unsecured notes have been guaranteed by Diageo plc. The
guarantee may terminate, in limited circumstances, prior to the maturity of the notes.

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Cash Flows

Cash
provided by continuing operations was $44.1 million in fiscal 2003, compared with $3.5 million in fiscal 2002. The increase in operating cash flows in the current year
was primarily due to higher earnings from continuing operations and payments received from an escrow account established as part of the acquisition. Fiscal 2003 cash flows were partially reduced by an
increase in working capital, which was driven by planned increases in inventory levels at year end in advance of a large plant conversion in Toledo, Ohio, and the implementation of a new management
information system in our U.S. Consumer Products business. In addition, inventory balances increased as a result of higher commodity costs. Fiscal 2002 operating cash flows were also reduced by higher
working capital balances, which were driven by an increase in accounts receivable. Accounts receivable increased due to the termination of a receivable securitization program in Canada that we were
required to close under the new credit facilities that we entered into last year.

Under
a transition services agreement, General Mills provided us with various services for the acquired Pillsbury and General Mills retail businesses. These services included the
invoicing and collection of trade accounts receivable and payment of certain trade accounts payable. The effect of the transition services agreement was that trade receivables and payables associated
with the acquired retail businesses were carried by General Mills during fiscal 2003. The transition services ended in the first quarter of fiscal 2004, and as a result, our net working capital needs
will increase by approximately $15 million to $20 million during the first quarter as we assume direct responsibility for all billing, collection and payment activities of the acquired
businesses.

Investing
activities in fiscal 2003 primarily consisted of the proceeds from the disposition of the foodservice distribution business and capital expenditures of $33 million.
Capital expenditures included amounts for the development of a management information system for the U.S. Consumer Products business and additional investment in equipment at our Toledo, Ohio, plant.
Fiscal 2002 capital expenditures were $23.8 million, which included amounts for the expansion of our condiments-processing facility in Dunnville, Ontario.

For
fiscal 2004, we expect to spend about $40 million on capital projects. Our estimate includes payments of $11.5 million for the Toledo, Ohio, plant that we acquired from
General Mills.

The
following is a summary of our contractual obligations as of March 1, 2003:

|                              |  | Total |       | Less Than
1 Year |   | 1-3
Years |  | 4-5
Years |      | After
5 Years
|----------------------------- |  | ----- | ----- | ---------------- | - | --------- |  | --------- | ---- | -------------
|
|Revolving credit facility     |  | $     | 15.1  |                  | $ | 15.1      |  | $         |     |              
|Long-term debt                |  |       | 329.3 |                  |   | 1.3       |  |           | 44.8 |              
|Purchasing commitments        |  |       | 18.2  |                  |   | 18.2      |  |           |     |              
|Operating leases              |  |       | 12.8  |                  |   | 2.9       |  |           | 4.8  |              
|                              |  |       |       |                  |   |           |  |           |      |              
|Total contractual obligations |  | $     | 375.4 |                  | $ | 37.5      |  | $         | 49.6 |              
|                              |  |       |       |                  |   |           |  |           |      |              

We
continue to guarantee certain lease obligations of the foodservice distribution business that we sold in September 2002. As of March 1, 2003, the contingent liability
under the guarantees was $43.1 million.
We have not made and do not expect to make any payments under these guarantees. See Note 14 to the consolidated financial statements for additional information on the guarantees.

CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are described in Note 1 to the consolidated financial statements. We determined our critical accounting policies by
taking into consideration areas in financial statement preparation that involve the most significant or subjective assessments. Our most critical accounting policies relate to trade promotion
expenses, goodwill and other intangible assets,

9

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pension
plans and income taxes. Factors entering into our estimates included historical experience, current and expected economic conditions, and in certain cases, actuarial assumptions. Actual
results may differ from these estimates under different assumptions or conditions.

Trade
promotion

We
offer retailers trade incentives to purchase and promote our consumer products. Examples of trade promotion expenses are in-store feature and display activities, temporary
price discounts and new distribution (slotting) of our products. We expense the cost of these incentives during the period in which the promotion occurs based on estimated performance, except for
slotting fees, which are amortized over the expected period of benefit not to exceed 12 months. Actual payments may differ from estimates and are resolved in subsequent months.

Goodwill
and other intangible assets

Goodwill
represents the excess of costs of businesses acquired over the fair market value of net tangible and identifiable intangible assets. Identifiable intangible assets represent
costs allocated to noncompete agreements, trademarks and other specifically identifiable assets arising from business acquisitions. Effective in the first quarter of fiscal 2003, we completed the
adoption of SFAS No. 142, "Goodwill and Other Intangible Assets." We were, however, required to adopt certain provisions of SFAS No. 142 in fiscal 2002 with respect to intangible assets
we acquired as part of our acquisition of the Pillsbury and General Mills businesses. Under SFAS No. 142, goodwill and identifiable intangible assets that have indefinite lives are not
amortized but are tested annually for impairment or more frequently if impairment indicators exist. Identifiable intangible assets that do not have indefinite lives are amortized over their estimated
useful lives. Prior to the adoption of SFAS No. 142, goodwill was amortized on a straight-line basis over various periods not exceeding 40 years.

As
a result of initial impairment tests that we were required to complete under SFAS No. 142, we determined that all the goodwill associated with our foodservice distribution
business was impaired. Consequently, we recorded a $65.1 million ($41.3 million after tax) impairment charge in the first quarter of fiscal 2003. No other impairment charges resulted
from the required impairment evaluations on the rest of our reporting units, which were determined using discounted cash flows. Considerable management judgment is necessary to estimate future cash
flows. These estimates are based on historical data, anticipated market conditions and management plans.

Pension
plans

We
have defined benefit pension plans that cover substantially all of our employees in the United States and Canada. Benefits under these plans are generally based on employees' years of
service and average compensation or stated amounts for each year of service. We account for our defined benefit plans in accordance with SFAS No. 87, "Employers' Accounting for Pensions," which
requires that amounts recognized in financial statements be determined on an actuarial basis. The principal actuarial assumptions used to determine our pension costs are the discount rate and the
expected return on plan assets. Other actuarial assumptions that affect pension costs include compensation increase rates, mortality and withdrawal rates.

The
discount rate is used to determine the present value of future pension payments, which in turn affects the determination of pension expense. In accordance with SFAS No. 87,
the discount rate reflects the current market rate for long-term, high-quality fixed income investments (such as Moody's Aa-rated corporate bonds). While
year-end pension liabilities are determined based on the year-end discount rate, pension expense is determined based on the discount rate effective at the beginning of the
fiscal year. At the end of fiscal 2003 our discount rate was 6.4%, which was used to value pension liabilities at the end of fiscal 2003 and will be used to determine pension expense for fiscal 2004.
Our discount rate at the end of fiscal 2002 was 6.8%. The decrease in the discount rate at the end of fiscal 2003 was the result of the general reduction in market interest rates during the year. A
lower discount rate increases the present value of pension obligations and increases pension expense. For our principal

10

---

pension
plans, a 50 basis point decrease in our discount rate would have resulted in an increase in fiscal 2003 pension expense of approximately $0.3 million.

A
significant assumption in determining pension expense is the expected long-term rate of return on pension plan assets. To determine the expected long-term rate
of return, we consider our current asset allocation, as well as historical and expected returns on plan assets. While actual asset returns by their inherent nature are subject to considerable
year-to-year variability, the expected return is designed to be a long-term assumption and is not adjusted annually. To determine the expected asset return that is
included in current year pension expense, the assumed rate of return on plan assets is
multiplied by the beginning of the year value of plan assets. The difference between expected returns and actual returns is deferred and amortized into pension expense over future years. For fiscal
2003, 2002 and 2001 pension expense, we had assumed a 10.3% long-term expected return on plan assets. Although our historical asset returns have generally exceeded our expected return
assumption of 10.3%, we lowered our expected return rate to 9% for determination of fiscal 2004 pension expense. Our decision to lower the return rate was a result of equity market declines in recent
years and current market expectations. The effect of lowering the expected return on plan assets by 50 basis points would have resulted in an increase in fiscal 2003 pension expense of approximately
$1.4 million.

Income
taxes

Deferred
tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amount and the tax basis of
assets and liabilities. We regularly assess the likelihood that our deferred tax assets will be recovered from future taxable income, and we record a valuation allowance to reduce deferred tax assets
to the amounts that we believe to be realizable. During fiscal 2003, deferred tax assets increased by $36.3 million primarily as a result of the loss we incurred on the sale of our foodservice
distribution business. As a result of uncertainty over our ability to utilize certain state net operating loss and federal capital loss carryforwards that resulted from the sale, we recorded an
increase to the valuation allowance of $9.9 million during fiscal 2003. We believe that our remaining deferred tax assets, which include federal net operating loss carryforwards, will be
realized as a result of our expectations of future taxable income. If we are unable to generate sufficient future taxable income, we may be required to increase the amount of our valuation allowance,
which would increase our effective income tax rate and decrease net earnings.

NEW ACCOUNTING PRONOUNCEMENTS

For information regarding recent accounting pronouncements, see Note 1 to the consolidated financial statements.

MARKET RISK MANAGEMENT

We are exposed to market risks resulting from changes in commodity prices, foreign currency exchange rates and interest rates. Changes in these factors could
adversely affect our results of operations and financial position. To minimize these risks, we use derivative financial instruments, such as commodity futures contracts, currency forward contracts and
interest rate swaps. We use such derivative financial instruments as risk management tools and not for speculative or trading purposes. See Notes 9 and 10 to the consolidated financial statements for
further information regarding financial instruments.

Commodity
Risk Management: Our Canadian operations minimize the risk associated with wheat market price fluctuations by hedging wheat and flour inventories, open wheat purchase contracts
and open flour sales contracts with wheat futures contracts. In the United States, we enter into futures contracts to reduce the risk of price fluctuations on anticipated flour purchases. The U.S.
dollar-denominated futures contracts are traded on U.S. regulated exchanges.

11

---

The
open futures contracts mature in the period from May 2003 to December 2003 and substantially coincide with the maturities of the open wheat purchase contracts, open
flour sales contracts and the anticipated timing of flour purchases.

Foreign
Currency Hedging: Our Canadian operations enter into foreign currency forward contracts to minimize our exposure to foreign currency fluctuations as a result of U.S.
dollar-denominated sales and purchases. In addition, our Canadian operations also enter into foreign currency forward contracts that have the effect of converting the U.S. dollar-denominated grain
futures contracts (see Commodity Risk Management) into Canadian dollar equivalents.

Interest
Rate Risk Management: Our exposure to changes in interest rates results from borrowing activities used to meet our working capital and other long-term financing
needs. The interest rates on our term loans and revolving credit facility are variable and based on current market interest rates plus a spread based on our leverage. To reduce the impact of
fluctuating interest rates, we enter into interest rate swap agreements in order to fix a portion of our variable rate borrowings. Under the swap agreements, we agree with a counterparty to exchange
the difference between fixed rate and variable rate interest amounts calculated by reference to a notional amount.

We
use sensitivity analysis to determine the impact of market risk exposures on the fair values of our debt and financial instruments, including derivative financial instruments.
Sensitivity analysis assesses the risk of loss in market risk sensitive instruments based on hypothetical changes in market prices or rates. The following tables provide information on the potential
impact on fair value and pre-tax earnings assuming a 10% adverse change.

|                       |  | Potential Effect on Fair Value
|---------------------- |  | ------------------------------
|
|
|Futures contracts      |  | $                             
|Senior unsecured notes |  |                               
|Interest rate swaps    |  |                               

|                           |  | Potential Decrease in Pre-Tax Earnings
|-------------------------- |  | --------------------------------------
|
|
|Currency forward contracts |  | $                                     
|Debt                       |  |                                       
|

CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are
based on current expectations or
beliefs, including, but not limited to, statements concerning our operations and financial performance and condition. For this purpose, statements that are not statements of historical fact may be
deemed to be forward-looking statements. We caution that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important
factors, including, among others, successful completion of the integration of the acquired businesses; the impact of competitive products and pricing; changes in consumer preferences and tastes or
perceptions of health-related issues; effectiveness of advertising or market-spending programs; market or weather conditions that may affect the costs of grain, other raw materials and fuel; impact of
labor matters; changes in laws and regulations; fluctuations in foreign exchange and interest rates; the potential inability to collect on a $6 million insurance claim receivable related to the
loss of product in St. Petersburg, Russia; if collection is sought under our guarantees of lease obligations of our former foodservice distribution business; risks commonly encountered in
international trade; and other factors as may be discussed in our reports filed with the Securities and Exchange Commission.

12

---

INTERNATIONAL MULTIFOODS CORPORATION and SUBSIDIARIES        Consolidated Statements of Operations

|                                                        |                                                                            | Fiscal Year Ended |         
|------------------------------------------------------- | -------------------------------------------------------------------------- | ----------------- | --------
|
|
|Net sales                                               |                                                                            | $                 | 939,275 
|Cost of goods sold                                      |                                                                            |                   | (755,310
|                                                        |                                                                            |                   |         
|Gross profit                                            |                                                                            |                   | 183,965 
|Selling, general and administrative                     |                                                                            |                   | (110,753
|Unusual items                                           |                                                                            |                   |        
|                                                        |                                                                            |                   |         
|Operating earnings                                      |                                                                            |                   | 73,212  
|Interest, net                                           |                                                                            |                   | (24,564 
|Loss on cancellation of debt offering                   |                                                                            |                   |        
|Other income (expense), net                             |                                                                            |                   | (4,671  
|                                                        |                                                                            |                   |         
|Earnings from continuing operations before income taxes |                                                                            |                   | 43,977  
|Income taxes                                            |                                                                            |                   | (16,278 
|                                                        |                                                                            |                   |         
|Earnings from continuing operations                     |                                                                            |                   | 27,699  
|                                                        |                                                                            |                   |         
|Discontinued operations:                                |                                                                            |                   |         
|                                                        | Operating earnings (loss), after tax                                       |                   |         
|                                                        | Cumulative effect of change in accounting principle, net of tax of $23,781 |                   |         
|                                                        | Net loss on disposition, net of tax of $14,362                             |                   |         
|                                                        |                                                                            |                   |         
|Earnings (loss) from discontinued operations            |                                                                            |                   | (73,728 
|                                                        |                                                                            |                   |         
|Net earnings (loss)                                     |                                                                            | $                 | (46,029 
|                                                        |                                                                            |                   |         
|Basic earnings (loss) per share:                        |                                                                            |                   |         
|                                                        | Continuing operations                                                      |                   | $       
|                                                        | Discontinued operations                                                    |                   |         
|                                                        |                                                                            |                   |         
|                                                        |                                                                            | Total             |         
|                                                        |                                                                            |                   |         
|Diluted earnings (loss) per share:                      |                                                                            |                   |         
|                                                        | Continuing operations                                                      |                   | $       
|                                                        | Discontinued operations                                                    |                   |         
|                                                        |                                                                            |                   |         
|                                                        |                                                                            | Total             |         
|                                                        |                                                                            |                   |         
|Average shares of common stock outstanding:             |                                                                            |                   |         
|                                                        | Basic                                                                      |                   |         
|                                                        | Diluted                                                                    |                   |         
|                                                        |                                                                            |                   |         

See
accompanying notes to consolidated financial statements.

13

---

INTERNATIONAL MULTIFOODS CORPORATION and SUBSIDIARIES        Consolidated Balance Sheets

|                                             |                                                              | March 1,
2003              |         | March 2,
2002 |        
|-------------------------------------------- | ------------------------------------------------------------ | -------------------------- | ------- | ------------- | -------
|
|Assets                                       |                                                              |                            |         |               |        
|Current assets:                              |                                                              |                            |         |               |        
|                                             | Cash and cash equivalents                                    |                            | $       | 1,203         |        
|                                             | Trade accounts receivable, net of allowance                  |                            |         | 43,909        |        
|                                             | Inventories                                                  |                            |         | 124,659       |        
|                                             | Deferred income taxes                                        |                            |         | 6,247         |        
|                                             | Current assets of discontinued operations                    |                            |         |              |        
|                                             | Other current assets                                         |                            |         | 39,995        |        
|                                             |                                                              |                            |         |               |        
|                                             |                                                              | Total current assets       |         |               | 216,013
|Property, plant and equipment, net           |                                                              |                            | 235,118 |               |        
|Goodwill, net                                |                                                              |                            | 63,358  |               |        
|Other intangible assets, net                 |                                                              |                            | 135,986 |               |        
|Noncurrent assets of discontinued operations |                                                              |                            |        |               |        
|Other assets                                 |                                                              |                            | 115,789 |               |        
|                                             |                                                              |                            |         |               |        
|Total assets                                 |                                                              | $                          | 766,264 |               | $      
|                                             |                                                              |                            |         |               |        
|Liabilities and shareholders' equity         |                                                              |                            |         |               |        
|Current liabilities:                         |                                                              |                            |         |               |        
|                                             | Notes payable                                                |                            | $       | 15,110        |        
|                                             | Current portion of long-term debt                            |                            |         | 1,313         |        
|                                             | Accounts payable                                             |                            |         | 70,097        |        
|                                             | Current liabilities of discontinued operations               |                            |         |              |        
|                                             | Other current liabilities                                    |                            |         | 60,499        |        
|                                             |                                                              |                            |         |               |        
|                                             |                                                              | Total current liabilities  |         |               | 147,019
|Long-term debt                               |                                                              |                            | 328,030 |               |        
|Deferred income taxes                        |                                                              |                            | 22,571  |               |        
|Employee benefits and other liabilities      |                                                              |                            | 32,675  |               |        
|                                             |                                                              |                            |         |               |        
|                                             |                                                              | Total liabilities          |         |               | 530,295
|                                             |                                                              |                            |         |               |        
|Shareholders' equity:                        |                                                              |                            |         |               |        
|                                             | Preferred capital stock                                      |                            |         |              |        
|                                             | Common stock, authorized 50,000 shares; issued 21,844 shares |                            |         | 2,184         |        
|                                             | Capital in excess of par value                               |                            |         | 93,856        |        
|                                             | Retained earnings                                            |                            |         | 211,366       |        
|                                             | Accumulated other comprehensive loss                         |                            |         | (10,181       | )      
|                                             | Treasury stock, 2,664 and 2,850 shares, at cost              |                            |         | (58,676       | )      
|                                             | Unearned compensation                                        |                            |         | (2,580        | )      
|                                             |                                                              |                            |         |               |        
|                                             |                                                              | Total shareholders' equity |         |               | 235,969
|                                             |                                                              |                            |         |               |        
|Commitments and contingencies                |                                                              |                            |         |               |        
|                                             |                                                              |                            |         |               |        
|Total liabilities and shareholders' equity   |                                                              | $                          | 766,264 |               | $      
|                                             |                                                              |                            |         |               |        

See
accompanying notes to consolidated financial statements.

14

---



INTERNATIONAL MULTIFOODS CORPORATION and SUBSIDIARIES        Consolidated Statements of Cash Flows

|                                                             |                                                                                                         | Fiscal Year Ended                                   |                                                 
|------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ------------------------------------------------
|
|
|Cash flows from operations:                                  |                                                                                                         |                                                     |                                                 
|                                                             | Earnings from continuing operations                                                                     |                                                     | $                                               
|                                                             | Adjustments to reconcile earnings from continuing operations to cash provided by continuing operations: |                                                     |                                                 
|                                                             |                                                                                                         | Depreciation and amortization                       |                                                 
|                                                             |                                                                                                         | Unusual items                                       |                                                 
|                                                             |                                                                                                         | Deferred income tax expense (benefit)               |                                                 
|                                                             |                                                                                                         | Increase in prepaid pension assets                  |                                                 
|                                                             |                                                                                                         | Provision for losses on receivables                 |                                                 
|                                                             |                                                                                                         | Deferred gain on terminated interest rate swap      |                                                 
|                                                             |                                                                                                         | Payments received from escrow fund                  |                                                 
|                                                             |                                                                                                         | Changes in working capital*                         |                                                 
|                                                             |                                                                                                         | Other, net                                          |                                                 
|                                                             |                                                                                                         |                                                     |                                                 
|                                                             |                                                                                                         | Cash provided by continuing operations              |                                                 
|                                                             |                                                                                                         | Cash provided by (used for) discontinued operations |                                                 
|                                                             |                                                                                                         |                                                     |                                                 
|                                                             |                                                                                                         |                                                     | Cash provided by (used for) operations          
|                                                             |                                                                                                         |                                                     |                                                 
|Cash flows from investing activities:                        |                                                                                                         |                                                     |                                                 
|                                                             | Capital expenditures                                                                                    |                                                     |                                                 
|                                                             | Acquisition of business                                                                                 |                                                     |                                                 
|                                                             | Proceeds from disposition of business                                                                   |                                                     |                                                 
|                                                             | Sale of Venezuelan operation assets                                                                     |                                                     |                                                 
|                                                             | Payments received on note receivable                                                                    |                                                     |                                                 
|                                                             | Proceeds from property disposals                                                                        |                                                     |                                                 
|                                                             | Discontinued operations                                                                                 |                                                     |                                                 
|                                                             |                                                                                                         |                                                     |                                                 
|                                                             |                                                                                                         |                                                     | Cash provided by (used for) investing activities
|                                                             |                                                                                                         |                                                     |                                                 
|Cash flows from financing activities:                        |                                                                                                         |                                                     |                                                 
|                                                             | Net increase (decrease) in notes payable                                                                |                                                     |                                                 
|                                                             | Additions to long-term debt                                                                             |                                                     |                                                 
|                                                             | Reductions in long-term debt                                                                            |                                                     |                                                 
|                                                             | Dividends paid                                                                                          |                                                     |                                                 
|                                                             | Proceeds from issuance of common stock                                                                  |                                                     |                                                 
|                                                             | Purchase of treasury stock                                                                              |                                                     |                                                 
|                                                             | Capitalized debt issuance costs                                                                         |                                                     |                                                 
|                                                             | Other, net                                                                                              |                                                     |                                                 
|                                                             |                                                                                                         |                                                     |                                                 
|                                                             |                                                                                                         |                                                     | Cash provided by (used for) financing activities
|                                                             |                                                                                                         |                                                     |                                                 
|Decrease in cash from discontinued operations                |                                                                                                         |                                                     | 14                                              
|                                                             |                                                                                                         |                                                     |                                                 
|Effect of exchange rate changes on cash and cash equivalents |                                                                                                         |                                                     | 167                                             
|                                                             |                                                                                                         |                                                     |                                                 
|Net increase (decrease) in cash and cash equivalents         |                                                                                                         |                                                     | (25,256                                         
|Cash and cash equivalents at beginning of year               |                                                                                                         |                                                     | 26,459                                          
|                                                             |                                                                                                         |                                                     |                                                 
|Cash and cash equivalents at end of year                     |                                                                                                         | $                                                   | 1,203                                           
|                                                             |                                                                                                         |                                                     |                                                 
|*Cash flows from changes in working capital:                 |                                                                                                         |                                                     |                                                 
|                                                             | Trade accounts receivable                                                                               |                                                     | $                                               
|                                                             | Inventories                                                                                             |                                                     |                                                 
|                                                             | Other current assets                                                                                    |                                                     |                                                 
|                                                             | Accounts payable                                                                                        |                                                     |                                                 
|                                                             | Other current liabilities                                                                               |                                                     |                                                 
|                                                             |                                                                                                         |                                                     |                                                 
|                                                             |                                                                                                         |                                                     | Net change                                      
|                                                             |                                                                                                         |                                                     |                                                 

See accompanying notes to consolidated financial statements.

15

---

INTERNATIONAL MULTIFOODS CORPORATION and SUBSIDIARIES        Consolidated Statements of Shareholders' Equity

|                                             |  | 10 cents par value |       |  |   |         |   |   |        |   |   |         |  
|-------------------------------------------- |  | ------------------ | ----- |  | - | ------- | - | - | ------ | - | - | ------- | -
|
|
|
|Balance at Feb. 29, 2000                     |  | $                  | 2,184 |  | $ | (68,437 | ) | $ | 91,888 |   | $ | 242,013 |  
|Comprehensive income(a)                      |  |                    |      |  |   |        |   |   |       |   |   | 21,175  |  
|Dividends declared on common stock           |  |                    |      |  |   |        |   |   |       |   |   | (14,984 | )
|9 shares purchased for treasury              |  |                    |      |  |   | (148    | ) |   |       |   |   |        |  
|17 shares issued for employee benefit plans  |  |                    |      |  |   | 346     |   |   | (245   | ) |   |        |  
|Amortization of unearned compensation        |  |                    |      |  |   |        |   |   |       |   |   |        |  
|                                             |  |                    |       |  |   |         |   |   |        |   |   |         |  
|Balance at March 3, 2001                     |  |                    | 2,184 |  |   | (68,239 | ) |   | 91,643 |   |   | 248,204 |  
|Comprehensive income(a)                      |  |                    |      |  |   |        |   |   |       |   |   | 9,191   |  
|248 shares issued for employee benefit plans |  |                    |      |  |   | 5,468   |   |   | 829    |   |   |        |  
|Amortization of unearned compensation        |  |                    |      |  |   |        |   |   |       |   |   |        |  
|                                             |  |                    |       |  |   |         |   |   |        |   |   |         |  
|Balance at March 2, 2002                     |  |                    | 2,184 |  |   | (62,771 | ) |   | 92,472 |   |   | 257,395 |  
|Comprehensive loss(a)                        |  |                    |      |  |   |        |   |   |       |   |   | (46,029 | )
|5 shares purchased for treasury              |  |                    |      |  |   | (107    | ) |   |       |   |   |        |  
|191 shares issued for employee benefit plans |  |                    |      |  |   | 4,202   |   |   | 1,384  |   |   |        |  
|Amortization of unearned compensation        |  |                    |      |  |   |        |   |   |       |   |   |        |  
|                                             |  |                    |       |  |   |         |   |   |        |   |   |         |  
|Balance at March 1, 2003                     |  | $                  | 2,184 |  | $ | (58,676 | ) | $ | 93,856 |   | $ | 211,366 |  
|                                             |  |                    |       |  |   |         |   |   |        |   |   |         |  

---

2003

2002

2001(in thousands)Net earnings (loss)

$
(46,029
)
$
9,191

$
21,175Other comprehensive income (loss):Foreign currency translation adjustments


7,025


(2,868
)

(5,175
)Net unrealized gain (loss) on cash flow hedges (net of tax of $1,136 and $(3,660), respectively)


(2,095
)

6,987


Reclassification adjustment for cash flow hedges recognized in earnings (net of tax of $(143) and $612, respectively)


241


(1,014
)

Minimum pension liability adjustment (net of tax of $220, $179 and $239, respectively)


(512
)

(275
)

(373
)Other comprehensive income (loss)


4,659


2,830


(5,548
)Comprehensive income (loss)

$
(41,370
)
$
12,021

$
15,627


See
accompanying notes to consolidated financial statements.

16

---

Notes to Consolidated Financial Statements

Note 1: Summary of Significant Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates
and assumptions that affect the amounts reported in the consolidated financial statements and related notes to consolidated financial statements. Actual results could differ from these estimates.

In
fiscal 2001, we changed our fiscal year from the last day of February to the Saturday closest to the last day of February. Fiscal 2001 was a 53-week year.

Basis of Statement Presentation

The accompanying consolidated financial statements include the accounts of International Multifoods Corporation and all of its subsidiaries. Intercompany accounts
and transactions have been eliminated in consolidation.

Revenue Recognition

We record sales upon delivery of our products, net of returns and other allowances.

Trade Promotion

We offer retailers trade incentives to purchase and promote our consumer products. Examples of trade promotion expenses are in-store feature and
display activities, temporary price discounts and new distribution (slotting) of our products. We expense the cost of these incentives during the period in which the promotion occurs based on
estimated performance, except for slotting fees, which are amortized over the expected period of benefit not to exceed 12 months.

Foreign Currency Translation and Transactions

The functional currency of our Canadian operations is the Canadian dollar. Assets and liabilities are translated at current exchange rates, and results of
operations are translated using the weighted average exchange rate in effect during the fiscal year. The gains or losses resulting from translation are included as a separate component of
shareholders' equity.

Stock-Based Compensation

We have elected to use the intrinsic value method prescribed by Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for employee stock options. Under the intrinsic value method, compensation expense is recorded only to the extent that the market price of the
common stock exceeds the exercise price of the stock option on the date of grant.

The
following table provides pro forma information on the impact on earnings from continuing operations if stock options were expensed under a fair value-based method. Additional
information

17

---

regarding
the expense calculated under a fair value-based method is provided in Note 15 to the consolidated financial statements.

2003

2002

2001(in thousands, except per share data)Earnings from continuing operations:As reported

$
27,699

$
5,019

$
16,847Stock-based employee compensation expense determined under fair value-based method, net of tax


(2,143
)

(1,173
)

(1,370
)Pro forma

$
25,556

$
3,846

$
15,477Diluted earnings per share from continuing operations:As reported

$
1.43

$
0.26

$
0.89Pro forma


1.32


0.20


0.82


Income Taxes

Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying
amount and the tax basis of assets and liabilities.

Earnings Per Share

Basic earnings per share are computed by dividing net earnings or loss by the weighted average shares outstanding during the reporting period. Diluted earnings
per share are computed similar to basic earnings per share except that the weighted average shares outstanding are increased to include additional shares from the assumed exercise of stock options, if
dilutive. The number of additional shares is calculated by assuming that outstanding stock options were exercised and that the proceeds from such exercises were used to acquire shares of common stock
at the average market price during the reporting period.

The
computations for basic and diluted earnings per share from continuing operations are as follows:

2003

2002

2001(in thousands, except per share data)Earnings from continuing operations

$
27,699

$
5,019

$
16,847Average shares of common stock outstanding:Basic


19,107


18,851


18,739Effect of stock options


308


245


135Diluted


19,415


19,096


18,874Earnings per share from continuing operations:Basic

$
1.45

$
0.27

$
0.90Diluted


1.43


0.26


0.89


Cash and Cash Equivalents

Included in cash and cash equivalents are cash on hand, time deposits and highly liquid short-term investments purchased with original maturities of
three months or less.

18

---

Trade Accounts Receivable

Accounts receivable consist of amounts owed us in the ordinary course of business and are presented net of an allowance for doubtful accounts. The allowance for
doubtful accounts is based upon the aging of receivables and review of specific accounts.

Inventories

Inventories, excluding grain in Canada, are valued principally at the lower of cost (first-in, first-out) or market (replacement or net
realizable value).

In
Canada, grain inventories are valued on the basis of replacement market prices prevailing at fiscal year end. We generally minimize risks associated with market price fluctuations by
hedging those inventories with futures contracts. Therefore, included in inventories is the amount of gain or loss on open grain contracts, including futures contracts, which generally has the effect
of adjusting those inventories to cost.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, and depreciation is computed using the straight-line method for determining financial statement
income. Buildings and improvements are generally depreciated over 15 to 40 years. Machinery and equipment used in the production process are typically depreciated over 10 to 15 years.
Computer equipment, including software and hardware, are depreciated over three to seven years. The useful lives of leasehold improvements are the shorter of the useful life of the asset or the lease
term. When permitted, accelerated depreciation methods are used to calculate depreciation for income tax purposes.

Goodwill and Other Intangible Assets

Goodwill represents the excess of costs of businesses acquired over the fair market value of net tangible and identifiable intangible assets. Identifiable
intangible assets represent costs allocated to noncompete agreements, trademarks and other specifically identifiable assets arising from business acquisitions. Effective in the first quarter of fiscal
2003, we completed the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." We were, however, required to adopt certain provisions of
SFAS No. 142 in fiscal 2002 with respect to intangible assets we acquired as part of our acquisition of the Pillsbury and General Mills businesses. Under SFAS No. 142, goodwill and
identifiable intangible assets that have indefinite lives are not amortized but are
tested annually for impairment or more frequently if impairment indicators exist. Identifiable intangible assets that do not have indefinite lives are amortized over their estimated useful lives.
Prior to the adoption of SFAS No. 142, goodwill was amortized on a straight-line basis over various periods not exceeding 40 years. See Note 8 to the consolidated
financial statements for additional information on the adoption of SFAS No. 142.

Recoverability of Long-Lived Assets

We assess the recoverability of long-lived assets (other than goodwill and intangible assets with indefinite lives) whenever events or changes in
circumstances indicate that expected future undiscounted cash flows may not be sufficient to support the carrying amount of an asset. We deem an asset to be impaired if a forecast of undiscounted
future operating cash flows is less than its carrying amount. If an asset is determined to be impaired, the loss is measured as the amount by which the carrying value of the asset exceeds its fair
value.

19

---

Pension Plans

Our defined benefit pension plans cover substantially all employees in the United States and Canada. In determining the liabilities, cash contributions and
expenses related to the plans, various actuarial assumptions are used. These include assumptions on the discount or interest rates, compensation increase rates, expected rate of return on plan assets,
mortality and withdrawal rates.

Derivative and Hedging Activities

We adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities," effective March 4, 2001. SFAS No. 133, as amended, requires that companies record derivative instruments on the consolidated
balance sheet at their fair value. Changes in fair value are recorded each period in earnings or other comprehensive income (OCI), depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in OCI are reclassified as earnings in the period in which earnings are affected by the
hedged item. See Note 9 to the consolidated financial statements for additional information.

New Accounting Pronouncements

We adopted SFAS No. 142 on March 3, 2002. Under SFAS No. 142, goodwill and other intangible assets that have indefinite lives are no longer
amortized but rather are tested for impairment at least annually in accordance with the provisions of the standard. See Note 8 to the consolidated financial statements for further information
on the adoption of SFAS No. 142.

We
adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," on March 3, 2002. SFAS No. 144, which supersedes SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," provides guidance on the accounting for and reporting of the
impairment of long-lived assets. Although SFAS No. 144 retains many of the fundamental recognition and measurement provisions of SFAS No. 121, it also establishes certain
criteria that would have to be met in order to classify an asset as held-for-sale. With the exception of a certain key provision on classification, SFAS No. 144 also
supersedes APB Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events
and Transactions." The adoption of SFAS No. 144 did not affect our consolidated financial statements.

We
adopted Emerging Issues Task Force (EITF) No. 01-9,"Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's Products" on
March 3, 2002. The purpose of the EITF is to codify and reconcile the consensus reached on accounting for consideration paid from a vendor to a retailer, including slotting fees, cooperative
advertising arrangements and buy-downs. The EITF also addresses accounting for coupons. The guidance generally requires that these incentives be classified as a reduction of sales. In
addition, EITF No. 01-9 requires reclassification of prior-period financial statements to comply with its guidance. As a result, we reclassified $12.6 million and
$10 million in promotional expenses to reduction of net sales for fiscal 2002 and 2001, respectively. The reclassification had no impact on our reported earnings.

In
April 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement
No. 13, and Technical Corrections." SFAS No. 145 rescinds SFAS No. 4, which required gains and losses from the extinguishment of debt to be classified as an extraordinary item.
These gains and losses must now be included in income from continuing operations. The rescission of SFAS No. 4 is effective for fiscal years beginning after May 15, 2002, with earlier
application encouraged.    We adopted the provisions of SFAS No. 145 that rescind SFAS No. 4 in the three-month period ended Nov. 30, 2002. As a result,

20

---

we
reclassified a $0.7 million extraordinary loss on the early extinguishment of debt recognized in last year's third quarter to other expense in continuing operations.

In
June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." The standard requires that a liability for a cost associated
with an exit or disposal activity be recognized and measured initially at fair value when the liability is incurred. Under previous accounting literature, certain costs for exit activities were
recognized at the date a company committed to an exit plan. The provisions of the standard are effective for exit or disposal activities initiated after Dec. 31, 2002. The standard is generally
expected to delay recognition of certain exit related costs.

In
November 2002, the FASB issued Interpretation No. 45 (FIN 45), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." FIN 45 provides guidance on the recognition and disclosure of certain types of guarantees. In connection with the sale of our foodservice distribution business to Wellspring
Distribution Corp., we continue to guarantee certain real estate, information system and tractor/trailer fleet lease obligations of our former business. In accordance with the provisions of FIN 45, we
have disclosed the nature of the guarantee, maximum potential amount of future payments and recourse provisions. See Note 14 to the consolidated financial statements for further information.

In
December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based CompensationTransition and Disclosure." SFAS No. 148 amends SFAS
No. 123, "Accounting for Stock-Based Compensation," and provides alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 also amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements of the
method of accounting for stock-based employee compensation and the effect of the method used on reported results. We have elected, as permitted by the standard, to continue to follow the intrinsic
value method of accounting as prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees." We believe there continues to be unresolved questions associated with the valuation
of stock options under the fair value method as well as uncertainty over the impact of efforts to reconcile differences between international and U.S. accounting standards. Upon clarification of these
matters, we will decide whether to adopt the fair value method of accounting for stock-based compensation.

Note 2: Business Acquired

On Nov. 13, 2001, we acquired the Pillsbury desserts and specialty products business, the Pillsbury non-custom foodservice baking mix and
frosting products business, and certain regional flour and side-dish brands of General Mills (the acquisition). The cash purchase price for the acquisition paid at closing was
$304.5 million. The transaction was accounted for under the purchase method in accordance with SFAS No. 141, "Business Combinations."

As
part of the $304.5 million purchase price, General Mills agreed to install processing and packaging equipment at a plant in Toledo, Ohio, in order for the plant to be able to
produce certain Pillsbury products. We agreed to purchase the Toledo plant, as part of the acquisition, for an additional $11.5 million. We completed the purchase on Jan. 27, 2003, and
pursuant to our agreement with General Mills, we will pay the $11.5 million during fiscal 2004.

We
completed the final allocation of the purchase price in fiscal 2003. Included in the initial purchase price allocation was an estimate of the value of the equipment General Mills was
required to install in the Toledo plant. The estimated value of the equipment was classified in other non-current assets in our consolidated balance sheet. Upon purchase of the plant and
completion of independent appraisals, adjustments were made to reflect the equipment received at fair value. As the fair value of the equipment received was less than we had originally estimated, we
were required to increase the

21

---

goodwill
recognized from the acquisition. See Note 8 to the consolidated financial statements for additional information.

Assuming
the acquisition had occurred on March 1, 2000, the unaudited pro forma results of operations were as follows:

2002

2001(in millions, except
per share data)Net sales

$
943.3

$
956.1Earnings from continuing operations


37.4


60.0Basic earnings per share

$
1.98

$
3.20Diluted earnings per share


1.96


3.18


The
unaudited pro forma results of operations are based on our historical financial statements and those of the acquired businesses. We believe that costs under our ownership, including
marketing and product development, will exceed those included in the historical financial statements of the acquired businesses. Accordingly, the pro forma results do not purport to represent what our
results of operations would have been had the acquisition occurred on March 1, 2000.

Note 3: Discontinued Operations

On July 29, 2002, we entered into an agreement to sell our foodservice distribution business to Wellspring Distribution Corp. In accordance with SFAS
No. 144, we have reported the results of operations of the distribution business as discontinued operations. On Sept. 9, 2002, we completed the sale of our foodservice distribution
business for $166 million in cash. We recorded a net after-tax loss on the disposition of $25.9 million. We used the proceeds from the sale along with available cash balances
to repay debt obligations.

We
continue to guarantee certain real estate, information system and tractor/trailer lease obligations of the foodservice distribution business. See Note 14 to the consolidated
financial statements for further information.

The
following were the operating results of the discontinued operations:

2003

2002

2001(in thousands)Net sales

$
1,149,128

$
2,238,632

$
2,042,469Earnings (loss) before tax


(8,828
)

7,079


7,057Earnings (loss) after tax


(6,464
)

4,172


4,328


We
allocated interest expense to discontinued operations based on net assets that were specifically identifiable to the operation. The operating results of the business in fiscal 2003
included a $5.2 million pre-tax loss from the curtailment and settlement of pension obligations, resulting from the sale of the business. In addition, we recorded a
$3.7 million pre-tax charge in fiscal 2003 primarily for severance costs.

We
also recorded an after-tax loss of $41.3 million for the cumulative effect of change in accounting principle due to goodwill impairment. The charge was recognized
in the first quarter of fiscal 2003. See Note 8 to the consolidated financial statements for further information.

22

---

The
current and noncurrent assets and liabilities of the foodservice distribution business as of March 2, 2002, were as follows:

March 2,
2002(in thousands)Cash and cash equivalents

$
15Trade accounts receivables, net


104,595Inventories


134,445Other current assets


19,053Current assets of discontinued operations

$
258,108Property, plant and equipment, net

$
82,292Goodwill, net


65,123Other assets


3,749Noncurrent assets of discontinued operations

$
151,164Accounts payable

$
131,019Other current liabilities


12,092Current liabilities of discontinued operations

$
143,111


Note 4: Interest, Net

Interest, net, consisted of the following:

2003

2002

2001(in thousands)Interest expense

$
30,713

$
22,980

$
18,269Capitalized interest


(625
)

(385
)

(542
)Non-operating interest income


(350
)

(1,210
)

(2,926
)29,738


21,385


14,801Interest expense allocated to discontinued operations


(5,174
)

(9,750
)

(10,601
)Interest, net

$
24,564

$
11,635

$
4,200


Cash
payments for interest, net of amounts capitalized, totaled $24.6 million in fiscal 2003, $22.5 million in fiscal 2002 and $19.3 million in fiscal 2001.

Note 5: Unusual Items

Fiscal 2002

We recognized a pre-tax unusual gain of $0.3 million as follows:

Gain on
Sale of
Building

Employee
Termination
and Other
Exit Costs

Total(in millions)Condiments facility consolidation

$
1.8

$
(0.3
)
$
1.5Sales reorganization and work-force reduction





(0.9
)

(0.9
)Severance for divested business





(0.3
)

(0.3
)Total unusual gain

$
1.8

$
(1.5
)
$
0.3


23

---

In
October 2001, we completed the sale of our condiments-processing facility in Scarborough, Ontario, as part of a plan to consolidate our condiments-processing operations in
Dunnville, Ontario. We recognized a $1.8 million gain on the sale of the building and a $0.3 million charge for additional employee termination and facility closing costs. Certain costs
related to the project, including employee and equipment relocation expenses, were not included in the unusual charge. These expenses, which were included in general and administrative expenses and
recognized when incurred, totaled $1.6 million in fiscal 2002.

As
a result of the acquisition, we reorganized our Foodservice Products sales force. We also took steps to reduce our foodservice manufacturing overhead costs. As a result of these
actions, we recorded a $0.9 million charge for severance costs associated with the departure of 23 employees, including the president of the division.

Also
in fiscal 2002, we recognized an unusual charge of $0.3 million for termination benefits for 57 former hourly employees of our divested U.S. flour milling business. As part
of the sale agreement, we were obligated to provide, under certain conditions, severance payments for eligible former employees who are involuntarily terminated by the buyer.

Fiscal 2001

We recognized a pre-tax unusual gain of $3.8 million as follows:

Gain on
Sale of
Building

Employee
Termination
and Other
Exit Costs

Total(in millions)Condiments facility consolidation

$


$
(1.8
)
$
(1.8
)Sale of headquarters building


5.8


(0.2
)

5.6Total unusual gain

$
5.8

$
(2.0
)
$
3.8


Our
condiments consolidation project included expanding our Canadian condiments operation in Dunnville, Ontario, and closing a facility in Scarborough, Ontario. In fiscal 2001, we
recorded a pre-tax unusual charge of $1.8 million for severance and related benefit costs for 174 full-time and seasonal employees. Certain costs related to the project,
including employee and equipment relocation expenses, were not included in the unusual charge. These expenses, which were included in general and administrative expenses and recognized when incurred,
totaled $0.7 million in fiscal 2001. See further discussion under the Fiscal 2002 section of this Note.

We
recognized a pre-tax unusual gain of $5.8 million from the sale of our corporate headquarters building in Minnesota. We also incurred severance costs of
$0.2 million for corporate staff reductions that were associated with the sale.

24

---

Note 6: Income Taxes

Income tax expense for continuing operations was as follows:

|                            |  | U.S. Operations |        |   |   |      |  
|--------------------------- |  | --------------- | ------ | - | - | ---- | -
|
|
|
|2003:                       |  |                 |        |   |   |      |  
|Current expense             |  | $               | 234    |   | $ | 63   |  
|Deferred expense            |  |                 | 9,226  |   |   | 623  |  
|                            |  |                 |        |   |   |      |  
|Total tax expense           |  | $               | 9,460  |   | $ | 686  |  
|                            |  |                 |        |   |   |      |  
|2002:                       |  |                 |        |   |   |      |  
|Current expense (benefit)   |  | $               | (67    | ) | $ | 519  |  
|Deferred benefit            |  |                 | (5,196 | ) |   | (265 | )
|                            |  |                 |        |   |   |      |  
|Total tax expense (benefit) |  | $               | (5,263 | ) | $ | 254  |  
|                            |  |                 |        |   |   |      |  
|2001:                       |  |                 |        |   |   |      |  
|Current expense (benefit)   |  | $               | 4,904  |   | $ | (1   | )
|Deferred expense            |  |                 | 112    |   |   | 505  |  
|                            |  |                 |        |   |   |      |  
|Total tax expense           |  | $               | 5,016  |   | $ | 504  |  
|                            |  |                 |        |   |   |      |  

Temporary
differences that gave rise to deferred tax assets and liabilities as of March 1, 2003, and March 2, 2002, were as follows:

|                                            |  | 2003 |         | 2002
|------------------------------------------- |  | ---- | ------- | ----
|
|
|Depreciation and amortization               |  | $    | 1,099   |     
|Prepaid pension assets                      |  |      |        |     
|Accrued expenses                            |  |      | 20,750  |     
|Inventory valuation methods                 |  |      | 1,485   |     
|Provision for losses on receivables         |  |      | 461     |     
|Deferred income                             |  |      | 902     |     
|Loss carryforwards                          |  |      | 47,997  |     
|Alternative minimum tax credit carryforward |  |      | 2,615   |     
|Foreign tax credit carryforward             |  |      | 953     |     
|Other                                       |  |      | 3,025   |     
|                                            |  |      |         |     
|Subtotal                                    |  |      | 79,287  |     
|Valuation allowance                         |  |      | (11,460 | )   
|                                            |  |      |         |     
|Total deferred taxes                        |  | $    | 67,827  |     
|                                            |  |      |         |     

At
March 1, 2003, we had a U.S. federal consolidated net operating loss carryforward of approximately $100 million that will expire in fiscal 2022 and 2023. Our foreign
operations had a net operating loss carryforward of approximately $2.7 million that will expire in fiscal 2009 and 2010. We expect to fully utilize these operating loss carryforwards.

At
March 1, 2003, we had a U.S. federal consolidated capital loss carryforward of approximately $15 million that will expire in fiscal 2008. Our foreign operations had a
capital loss carryforward of approximately $1.5 million that has no expiration date. We have a valuation allowance of approximately $5.3 million and $0.6 million, respectively,
for the U.S. and foreign capital loss carryforwards due to the

25

---

uncertainty
over our ability to utilize the capital losses. This represents an increase of approximately $5.3 million over fiscal 2002, and was recognized in discontinued operations.

We
have approximately $1 million in U.S. foreign tax credit carryforwards that will expire by fiscal 2006. We have a valuation allowance for the entire $1 million
carryforward due to uncertainty over our ability to utilize these credits.

We
have U.S. state net operating loss carryforwards that will expire from fiscal 2004 to fiscal 2023. We have established a valuation allowance of approximately $4.6 million for
certain of these U.S. state net operating loss carryforwards, due to the uncertainty over our ability to utilize these operating loss carryforwards.

Total
income taxes from continuing operations differ from the amount computed by applying the U.S. federal income tax rate because of the following items:

2003

2002

2001(in thousands)Tax at U.S. federal statutory rate

$
15,392

$
2,629

$
11,215Differences:Effect of taxes on non-U.S. earnings


206


(59
)

3,217State and local income taxes


445


504


328Effect of intangibles





59


57Other


235


(639
)

378Total income taxes

$
16,278

$
2,494

$
15,195


No
provision has been made for U.S. income taxes applicable to remittance of earnings from non-U.S. affiliates. It is not practicable to estimate the remaining deferred tax
liability associated with temporary differences related to investments in non-U.S. affiliates. Earnings before income taxes from non-U.S. affiliates were $16.9 million
in fiscal 2003, $21.6 million in fiscal 2002 and $26.9 million in fiscal 2001.

Cash
paid for income taxes totaled $3.7 million in fiscal 2003, $7.5 million in fiscal 2002 and $10.8 million in fiscal 2001.

26

---

Note 7: Supplemental Balance Sheet Information

|                                           |                                         | 2003 |         | 2002     |  
|------------------------------------------ | --------------------------------------- | ---- | ------- | -------- | -
|
|Trade accounts receivable, net:            |                                         |      |         |          |  
|                                           | Trade                                   |      | $       | 44,276   |  
|                                           | Allowance for doubtful accounts         |      |         | (367     | )
|                                           |                                         |      |         |          |  
|Total trade accounts receivable, net       |                                         | $    | 43,909  |          | $
|                                           |                                         |      |         |          |  
|Inventories:                               |                                         |      |         |          |  
|                                           | Raw materials, excluding grain          |      | $       | 12,675   |  
|                                           | Grain                                   |      |         | 6,282    |  
|                                           | Finished and in-process goods           |      |         | 99,269   |  
|                                           | Packages and supplies                   |      |         | 6,433    |  
|                                           |                                         |      |         |          |  
|Total inventories                          |                                         | $    | 124,659 |          | $
|                                           |                                         |      |         |          |  
|Property, plant and equipment, net:        |                                         |      |         |          |  
|                                           | Land                                    |      | $       | 3,313    |  
|                                           | Buildings and improvements              |      |         | 69,309   |  
|                                           | Machinery and equipment                 |      |         | 235,570  |  
|                                           | Improvements in progress                |      |         | 44,889   |  
|                                           |                                         |      |         |          |  
|                                           |                                         |      | 353,081 |          |  
|                                           | Accumulated depreciation                |      |         | (117,963 | )
|                                           |                                         |      |         |          |  
|Total property, plant and equipment, net   |                                         | $    | 235,118 |          | $
|                                           |                                         |      |         |          |  
|Other assets:                              |                                         |      |         |          |  
|                                           | Prepaid pension                         |      | $       | 81,193   |  
|                                           | Advance for equipment                   |      |         |         |  
|                                           | Other                                   |      |         | 34,596   |  
|                                           |                                         |      |         |          |  
|Total other assets                         |                                         | $    | 115,789 |          | $
|                                           |                                         |      |         |          |  
|Other current liabilities:                 |                                         |      |         |          |  
|                                           | Trade and consumer promotion accruals   |      | $       | 37,369   |  
|                                           | Wages and benefits                      |      |         | 6,379    |  
|                                           | Income taxes                            |      |         | 7,340    |  
|                                           | Other                                   |      |         | 9,411    |  
|                                           |                                         |      |         |          |  
|Total other current liabilities            |                                         | $    | 60,499  |          | $
|                                           |                                         |      |         |          |  
|Accumulated other comprehensive loss:      |                                         |      |         |          |  
|                                           | Foreign currency translation adjustment |      | $       | (11,222  | )
|                                           | Derivative hedge accounting adjustment  |      |         | 4,119    |  
|                                           | Minimum pension liability adjustment    |      |         | (3,078   | )
|                                           |                                         |      |         |          |  
|Total accumulated other comprehensive loss |                                         | $    | (10,181 | )        | $
|                                           |                                         |      |         |          |  

27

---

Note 8: Goodwill and Other Intangible Assets

We adopted SFAS No. 142, "Goodwill and Other Intangible Assets," on March 3, 2002. Under SFAS No. 142, goodwill and other intangible assets
that have indefinite lives are no longer amortized, but rather are tested for impairment at least annually in accordance with the provisions of the standard.

The
test for goodwill impairment is a two-step process. The first step is a comparison of the fair value of the reporting unit (as defined) with its carrying amount,
including goodwill. If this step reflects impairment, then the loss would be measured as the excess of recorded goodwill over its implied fair value. Implied fair value is the excess of fair value of
the reporting unit over the fair value of all identified assets and liabilities.

In
the first quarter of fiscal 2003, we completed the initial testing of our existing goodwill and other intangible assets that have indefinite lives. Based on valuations provided by an
independent third-party (primarily using discounted cash flows), we determined that all the goodwill associated with our foodservice distribution business was impaired. As a result, we recorded a
$65.1 million ($41.3 million after tax) goodwill impairment charge in the first quarter of fiscal 2003. We classified the impairment charge as a cumulative effect of change in accounting
principle in the consolidated statement of operations. On July 29, 2002, we entered into an agreement to sell the business. In accordance with SFAS No. 144, we have reported the results
of operations of our foodservice distribution business in discontinued operations, including the impairment charge. No other impairment charges resulted from the required impairment evaluations on the
rest of the reporting units, which were determined using discounted cash flow analyses. The assumptions used in these analyses were consistent with our internal plans.

The
table below provides information on the carrying amount of goodwill by segment for the fiscal year ended March 1, 2003.

|                             |  | U.S.
Consumer
Products |        | Foodservice
Products |   | Canadian
Foods |  | Total
|---------------------------- |  | ---------------------- | ------ | -------------------- | - | -------------- |  | -----
|
|Balance as of March 3, 2002  |  | $                      | 24,715 |                      | $ | 12,643         |  | $    
|Addition                     |  |                        | 19,176 |                      |   | 329            |  |      
|Foreign currency translation |  |                        |       |                      |   |               |  |      
|                             |  |                        |        |                      |   |                |  |      
|Balance as of March 1, 2003  |  | $                      | 43,891 |                      | $ | 12,972         |  | $    
|                             |  |                        |        |                      |   |                |  |      

The
allocation of the purchase price for our Pillsbury and General Mills brand acquisition was completed in fiscal 2003. The addition to goodwill reflects adjustments to the preliminary
purchase price allocation, which primarily resulted from the completion of independent appraisals on equipment we acquired. See Note 2 to the consolidated financial statements for additional
information on the purchase price allocation.

28

---

Other
intangible assets as of March 1, 2003, and March 2, 2002, were as follows:

|                              |                       | March 1, 2003 |         | March 2, 2002
|----------------------------- | --------------------- | ------------- | ------- | -------------
|
|
|Amortized intangible assets   |                       |               |         |              
|                              | Trademarks            |               | $       | 9,090        
|                              | Noncompete agreements |               |         | 1,200        
|                              | Customer lists        |               |         | 5,800        
|                              | Other                 |               |         | 853          
|                              |                       |               |         |              
|Total                         |                       | $             | 16,943  |              
|                              |                       |               |         |              
|Unamortized intangible assets |                       |               |         |              
|                              | Trademarks            |               | $       | 127,302      
|                              | Other                 |               |         | 8            
|                              |                       |               |         |              
|Total                         |                       | $             | 127,310 |              
|                              |                       |               |         |              

Amortization
expense related to amortizable intangible assets for fiscal 2003 and 2002 was $1 million and $0.6 million, respectively. The estimated amortization expense for
fiscal 2004 to fiscal 2008 is as follows:

Amounts(in thousands)2004

$
9732005


9412006


9382007


9342008


921


29

---

The
following provides a reconciliation of reported earnings to pro forma amounts adjusted for the elimination of amortization of goodwill:

2002

2001(in thousands)Reported earnings from continuing operations

$
5,019

$
16,847Amortization of goodwill


313


278Adjusted earnings from continuing operations


5,332


17,125Reported earnings from discontinued operations


4,172


4,328Amortization of goodwill


1,472


1,458Adjusted earnings from discontinued operations


5,644


5,786Adjusted net earnings

$
10,976

$
22,911


Basic earnings per share

2002

2001Reported basic earnings per share from continuing operations

$
0.27

$
0.90Amortization of goodwill


0.02


0.01Adjusted basic earnings per share from continuing operations


0.29


0.91Reported basic earnings per share from discontinued operations


0.22


0.23Amortization of goodwill


0.07


0.08Adjusted basic earnings per share from discontinued operations


0.29


0.31Adjusted basic earnings per share

$
0.58

$
1.22


Diluted earnings per share

2002

2001Reported diluted earnings per share from continuing operations

$
0.26

$
0.89Amortization of goodwill


0.02


0.01Adjusted diluted earnings per share from continuing operations


0.28


0.90Reported diluted earnings per share from discontinued operations


0.22


0.23Amortization of goodwill


0.07


0.08Adjusted diluted earnings per share from discontinued operations


0.29


0.31Adjusted diluted earnings per share

$
0.57

$
1.21


Note 9: Derivative Instruments and Hedging Activities

We adopted SFAS No. 133, "Accounting for Derivative Instrument and Hedging Activities" as amended, effective March 4, 2001. SFAS No. 133
requires that companies record derivative instruments on the consolidated balance sheet at their fair value. Changes in fair value are recorded each period in earnings or other comprehensive income
(OCI), depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in OCI are
reclassified as earnings in the period in which earnings are affected by the hedged item.

The
impact of this change in fiscal 2002 resulted in a pre-tax charge of approximately $1 million to OCI and an increase to liabilities of approximately
$1 million. The balance in OCI has been reclassified to earnings over the life of the derivative instruments, which primarily have maturity terms of one year or less.

30

---

We
are exposed to market risks resulting from changes in foreign currency exchange rates, interest rates and commodity prices. Changes in these factors could adversely affect our results
of operations and financial position. To minimize these risks, we use derivative financial instruments, such as currency forward contracts, interest rate swaps and commodity futures contracts. We use
derivative financial instruments as risk management tools and not for speculative or trading purposes. For derivative instruments that are accounted for as hedges pursuant to SFAS No. 133, we
formally document the hedge at inception. The formal documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the hedging
instrument's effectiveness and ineffectiveness will be assessed.

Foreign Currency Forward Contracts

Our Canadian operations use foreign currency forward contracts to minimize the exposure to foreign currency fluctuations as a result of U.S. dollar-denominated
sales. The foreign exchange forward contracts are purchased through major Canadian banking institutions and mature in less than 12 months. These contracts are accounted for as foreign currency
cash flow hedges of forecasted transactions. To qualify for hedge accounting treatment, these transactions are specifically identified in terms of the customers and the period in which and the
likelihood that the sales and subsequent collections are expected to occur. The time value component of the foreign currency forward contracts is deemed ineffective and is recorded in earnings. The
unrealized gain (loss) due to the movements in the spot exchange rates, which represent the effective portion of the hedge, is initially recorded as a component of accumulated OCI until the underlying
hedged transaction occurs. On an ongoing basis, we also enter into foreign currency forward contracts that are not designated as hedges. Changes in the fair value are recognized in earnings.

Interest Rate Swaps

We are exposed to interest rate risks from our variable rate borrowings. We hedge against the risk of changes in future cash flows attributable to interest
payments on our variable rate borrowings by entering into interest rate swap agreements. Under SFAS No. 133, the swap agreements qualify for cash flow hedge accounting. The underlying debt
obligation and the swap agreements are based on the same notional amounts and benchmark rates, and have the same reset dates. There was no ineffectiveness related to these hedges.

Commodity Futures Contracts

We use commodity futures contracts, primarily wheat futures contracts, to reduce the risks associated with price fluctuations on the wheat inventories and other
major baking ingredients, such as flour, soybean oil and sugar. The futures contracts are not designated as hedges under SFAS No. 133. The futures contracts are
marked-to-market each month, and the gains and losses are recognized in earnings. The open futures contracts mature in the period from May 2003 to December 2003
and substantially coincide with the maturities of the open wheat purchase contracts, open flour sales contracts and the anticipated timing of flour purchases.

Note 10: Fair Value of Financial Instruments

The following tables provide information on the carrying amount, notional amount and fair value of financial instruments, including derivative financial
instruments. The carrying value of financial instruments classified as current assets and current liabilities, such as cash and cash equivalents, receivables, accounts payable and
short-term debt, approximate fair value due to the short-term

31

---

maturity
of the instruments. The fair value of long-term debt, futures contracts, currency forward contracts and interest rate swaps was based on quoted market prices.

|             |                                                | 2003 |   | 2002   
|------------ | ---------------------------------------------- | ---- | - | -------
|
|
|Liabilities: |                                                |      |   |        
|             | Term A loan due Sept. 30, 2006                 |      | $ |       
|             | Term B loan due Feb. 28, 2008                  |      |   | 129,343
|             | $200 million unsecured notes due Nov. 13, 2009 |      |   | 200,000

|                                  |                                 | 2003 |   | 2002    | 
|--------------------------------- | ------------------------------- | ---- | - | ------- | 
|
|
|Derivative financial instruments: |                                 |      |   |         | 
|                                  | Futures contracts-buy           |      | $ | 15,595  | 
|                                  | Futures contracts-sell          |      |   | 2,100   | 
|                                  | Currency forward contracts-buy  |      |   | 22,191  | 
|                                  | Currency forward contracts-sell |      |   | 1,490   | 
|                                  | Interest rate swaps             |      |   | 100,000 | 

Concentrations of Credit Risk

We believe that the credit risk of exchange-traded futures contracts, foreign exchange forward contracts and interest rate contracts due to nonperformance of the
counterparties is insignificant.

We
extend credit on a regular basis under various terms to customers that meet certain financial and other criteria. In general, we do not require collateral or security. We believe that
our trade receivables do not represent significant concentrations of credit risk due to the large number of customers and markets into which our products are sold, as well as their dispersion across
geographic areas.

Note 11: Notes Payable and Long-Term Debt

In fiscal 2002, we entered into a $450 million senior secured credit facility with a syndicate of banks, financial institutions and other entities, and
issued $200 million of senior unsecured notes. We applied the proceeds from borrowings under the new credit facility and notes to pay for the acquisition, refinance our existing debt, and pay
fees and expenses related to the refinancing of our indebtedness.

The
$450 million senior credit facility was composed of a $100 million revolving credit facility that expires on Sept. 30, 2006, a $150 million amortizing
Term A loan facility and a $200 million amortizing Term B loan facility. As of March 1, 2003, there were $15.1 million of borrowings outstanding under the revolving credit
facility and an additional $8.4 million of the facility was unavailable due to outstanding letters of credit. During fiscal 2003, we used the proceeds from the sale of our foodservice
distribution business and available cash balances to repay $210 million of the term loans. We recorded a $4.7 million charge associated with the early repayment of term loans, which we
classified as other income (expense), net in the consolidated statement of operations.

The
interest rates on borrowings under the senior credit facility are variable and based on current market interest rates plus a spread based on our leverage. The credit agreement
contains covenants that restrict dividend payments, limit capital expenditures and require the maintenance of leverage, interest coverage and fixed charge coverage ratios. Some of these covenants
become more restrictive

32

---

over
time. Borrowings under these facilities may be used for general corporate purposes. The facility is secured by substantially all our assets. We were in compliance with all covenant provisions at
March 1, 2003.

In
November 2001, we entered into interest rate swap agreements in order to fix a portion of our variable rate borrowings. The interest rate swap agreements were for terms of
1.5 years, 2 years and 3 years for notional amounts of $50 million, $25 million and $25 million, respectively. The fixed pay rates on the swaps are 2.81%,
3.33% and 3.93%, respectively, and we receive the three-month LIBOR rate. Including the impact of the swaps, the effective interest rate on borrowings under the senior secured facility was 5.85% as of
March 1, 2003.

The
$200 million senior unsecured notes mature on Nov. 13, 2009, and have an interest rate of 6.602%, payable annually. In anticipation of the issuance, we entered into an
interest rate swap agreement that, when terminated, had the effect of adjusting the effective interest of the notes to 5.97%. The senior unsecured notes have been guaranteed by Diageo plc. The
guarantee may terminate, in limited circumstances, prior to the maturity of the notes.

In
November 2001, we wrote off $10.3 million of underwriting and other direct costs associated with the planned issuance of $200 million in high-yield
unsecured notes. We canceled the debt offering as more favorable financing became available when, as part of the acquisition, Diageo plc agreed to guarantee $200 million of our debt
obligations.

Long-term
debt consisted of the following:

2003

2002(in thousands)Term A loan due Sept. 30, 2006

$


$
140,049Term B loan due Feb. 28, 2008


129,343


199,000$200 million unsecured notes due Nov. 13, 2009


200,000


200,000329,343


539,049Current portion of long-term debt


1,313


24,508Total long-term debt

$
328,030

$
514,541


Minimum
principal payments are as follows:

Amounts(in thousands)2005

$
1,3132006


1,3132007


42,2392008


83,1652009 and beyond


200,000Total long-term debt

$
328,030


Note 12: Shareholders' Equity

We have authorized 10 million shares of Preferred Capital Stock, par value $1.00 per share, that may be designated and issued as convertible into common
shares. We have created a series of such Preferred Capital Stock, designated as Series A Junior Participating Preferred Capital Stock, consisting of 500,000 shares, par value $1.00 per share.
We also have authorized 200,000 shares of First Preferred Capital Stock, par value $100.00 per share. No preferred capital stock was outstanding during the three years ended March 1, 2003.

33

---

We
have a share rights plan that entitles one preferred share purchase right for each outstanding share of common stock. The rights become exercisable only after a person or group (with
certain exceptions) becomes the beneficial owner of 15% or more of our outstanding common stock or announces a tender offer, the consummation of which would result in beneficial ownership by a person
or group of 15% or more of our outstanding common stock. Each right will entitle its holder to purchase one one-hundredth share of Series A Junior Participating Preferred Capital
Stock (consisting of 500,000 shares, par value $1.00 per share) at an exercise price of $70, subject to adjustment. If a person or group acquires beneficial ownership of 15% or more of our outstanding
common stock, each right will entitle its holder (other than such person or group) to purchase, at the then-current exercise price of the right, a number of shares of our common stock
having a market value of twice the then-current exercise price of the right. In addition, if we are acquired in a merger or other business combination transaction or if 50% or more of our
consolidated assets or earnings power is acquired, each right will entitle its holder to purchase, at the then-current exercise price of the right, a number of the acquiring company's
common shares having a market value of twice the then-current exercise price of the right. Following the acquisition by a person or group of beneficial ownership of 15% or more of our
outstanding common stock and prior to an acquisition by any person or group of 50% or more of our outstanding common stock, the Board of Directors may exchange the outstanding rights (other than
rights owned by such person or group), in whole or in part, for our common stock or equivalent securities. Prior to the acquisition by a person or group of beneficial ownership of 15% or more of our
outstanding common stock, the rights are redeemable for $.001 (subject to adjustment) per right at the option of the Board of Directors. In addition, prior to the acquisition by a person or group of
beneficial ownership of 15% or more of our outstanding common stock, the Board of Directors may amend the terms of the rights to lower the 15% threshold for exercisability of the rights to not less
than the greater of (i) the sum of .001% and the largest percentage of the outstanding common stock then beneficially owned by any person or group (with certain exceptions) or (ii) 10%.

Note 13: Leases

We lease certain plant, office space and equipment for varying periods. We expect that in the normal course of business, leases will be renewed or replaced by
other leases.

The
following is a schedule of future minimum lease payments for operating leases that had initial or remaining noncancelable lease terms in excess of one year as of March 1,
2003:

Operating
Leases(in thousands)2004

$
2,9082005


2,7482006


2,0112007


8312008


6012009 and beyond


3,710Total minimum lease payments

$
12,809


34

---

Total
net rent expense for operating leases of continuing operations, including those with terms of less than one year, consisted of the following:

2003

2002

2001(in thousands)Minimum rentals

$
4,995

$
4,610

$
3,906Sublease rentals








(249
)Total net rent expense

$
4,995

$
4,610

$
3,657


Note 14: Commitments and Contingencies

In fiscal 1998, we were notified that approximately $6 million of our inventory was taken from a ship in the port of St. Petersburg, Russia. The ship had
been chartered by a major customer of our former food-exporting business. Following submission of a claim for indemnity, the insurance carrier denied our claim for coverage, and we
commenced a lawsuit seeking to obtain coverage under the insurance carrier's policy. In October 2001, the U.S. District Court of the Southern District of New York granted us summary judgment on
our claim, which is carried on our books as a $6 million receivable, and awarded us interest to the date of judgment. The interest has not been recognized on our books. On Oct. 17, 2002,
following an appeal by the insurance carrier, the U.S. Court of Appeals for the Second Circuit partially affirmed the summary judgment with respect to the amount of loss and held that such loss is
within the scope of the policy. The Court of Appeals, however, remanded the case back to the District Court for further proceedings to determine whether certain provisions of the policy had the effect
of excluding coverage. We continue to believe that the loss is covered by the insurance policy, and we will continue to aggressively pursue our claim against the insurer. If we are ultimately unable
to collect on the policy, we would record a loss of $6 million to write off the receivable for the estimated recovery of the claim.

On
Sept. 9, 2002, we completed the sale of our foodservice distribution business to Wellspring Distribution Corp. We continue to guarantee certain real estate, information system
and tractor/trailer fleet lease obligations of our former business. However, at the time of the sale of the business, we renegotiated our guarantee of the business's fleet lease obligations. The
guarantee now requires the lessor to pursue collection and other remedies against our former subsidiaries before demanding
payment from us. In addition, our guarantee obligation is limited to 75% of the amount outstanding after the lessor has exhausted its remedies against our former subsidiaries. This reduces our risk
under the fleet lease guarantee. In addition, while the initial guarantee was not limited by time, the fleet lease guarantee will now expire in September 2006.

The
outstanding guarantees for the lease obligations of our former subsidiaries as of March 1, 2003, were as follows:

Amounts(in millions)Tractor/trailer

$
26.5Real estate


16.4Information systems


0.2Total

$
43.1


If
Wellspring Distribution Corp. was unable to meet its obligations that we have guaranteed, any loss would be reduced by the amount generated from the liquidation of the tractor/trailer
fleet and income from the sub-lease of real estate space.

35

---

The
possibility that we would have to honor our contingent liabilities under the guaranties is largely dependent upon the future operations of our former subsidiaries and the value of
the underlying leased properties. Should a reserve be required in the future, it would be recorded at the time the obligation was determined to be probable.

At
March 1, 2003, the estimated cost to complete improvements in progress totaled approximately $12 million.

Note 15: Stock Plans

Our 1989 and 1997 stock-based plans permit awards of restricted stock, incentive units and stock options to directors and key employees subject to the provisions
of the plans and as determined by the Compensation and Human Resources Committee of the Board of Directors. At March 1, 2003, a total of 432,319 common shares was available for grants.

In
fiscal 2003, grants of 11,424 shares of restricted stock and 59,800 restricted stock units were awarded with varying performance criteria and vesting periods. At March 1, 2003,
the total number of restricted shares outstanding was 107,584. The market value of shares issued under the plans, as of the date of grant, has been recorded as unearned compensation and is shown as a
separate component of shareholders' equity. Unearned compensation is expensed over the period that restrictions lapse.

Stock
options are granted to purchase shares of our common stock at not less than fair market value at dates of grant. Options generally become exercisable over a period of one to five
years after the date of grant. In addition, options generally expire 10 years after the date of grant.

The
per-share weighted-average fair values of stock options granted were $12.47 in fiscal 2003, $10.23 in fiscal 2002 and $3.46 in fiscal 2001. The fair value of options at
the date of grant was estimated using the Black-Scholes option-pricing model. The following weighted-average assumptions were used in the calculation:

Assumptions

2003

2002

2001Expected dividend yield

0.0
%
0.0
%
4.4
%Expected volatility

33.5
%
32.1
%
31.6
%Risk-free interest rates

4.8
%
5.0
%
6.4
%Expected life (in years)

7.2

7.7

7.3


We
apply the intrinsic value method prescribed by APB Opinion No. 25 in accounting for the compensation costs of employee stock options in the financial statements. Under the
intrinsic value method, compensation expense is recorded only to the extent that the market price of common stock exceeds the exercise price of the stock option on the date of grant. See Note 1
to the consolidated financial statements for the pro forma impact on earnings from continuing operations if stock options had been expensed under the fair value method.

36

---

The
following table contains information on stock options:

Shares

Weighted
Average Exercise
Price per ShareOutstanding at Feb. 29, 2000

1,374,022

$
23.05Granted

541,742


12.03Exercised

(6,000
)

16.00Expired or canceled

(252,940
)

22.37Outstanding at March 3, 2001

1,656,824

$
19.57Granted

460,089


21.74Exercised

(121,750
)

14.08Expired or canceled

(69,300
)

24.41Outstanding at March 2, 2002

1,925,863

$
20.21Granted

229,809


27.04Exercised

(133,925
)

19.64Expired or canceled

(134,220
)

23.96Outstanding at March 1, 2003

1,887,527

$
21.06Options exercisable at:March 3, 2001

924,152

$
22.22March 2, 2002

1,279,213

$
19.04March 1, 2003

1,263,939

$
19.15


For
options outstanding at March 1, 2003, the range of exercise price per share was $11.84 to $29.28, and the average remaining contractual life was 6.4 years.

Note 16: Retirement Plans

Defined Benefit Pension Plans and Other Post-Retirement Benefits

In the United States and Canada, defined benefit pension plans cover substantially all employees. Benefits are based primarily on years of credited service and
average compensation or stated amounts for each year of service. These plans are generally funded by contributions to tax-exempt trusts in amounts sufficient to provide assets to cover the
plans' obligations. Plan assets consist principally of listed equity securities, fixed income securities and cash equivalents.

We
also provide post-retirement health and life insurance benefits for retirees in the United States and Canada who meet minimum age and service requirements. Life insurance
benefits are funded on a pay-as-you-go basis through an insurance company. Health-care benefits are provided under a self-insured program
administered by an insurance company.

37

---

Summaries
related to the changes in benefit obligations and plan assets, and to the funded status of the plans are as follows:

|                                                                 |                                      | Pension Benefits |         | Post-Retirement
Benefits |  
|---------------------------------------------------------------- | ------------------------------------ | ---------------- | ------- | ------------------------ | -
|
|
|Change in benefit obligation                                     |                                      |                  |         |                          |  
|Benefit obligation at beginning of year                          |                                      | $                | 207,535 |                          | $
|Service cost                                                     |                                      |                  | 3,446   |                          |  
|Interest cost                                                    |                                      |                  | 13,506  |                          |  
|Plan participants' contributions                                 |                                      |                  | 669     |                          |  
|Amendments                                                       |                                      |                  | 1,487   |                          |  
|Plan expenses                                                    |                                      |                  | (511    | )                        |  
|Actuarial loss                                                   |                                      |                  | 9,866   |                          |  
|Benefits payments                                                |                                      |                  | (16,741 | )                        |  
|Curtailments                                                     |                                      |                  | (2,021  | )                        |  
|Settlements                                                      |                                      |                  | (10,477 | )                        |  
|Foreign exchange adjustment                                      |                                      |                  | 4,771   |                          |  
|                                                                 |                                      |                  |         |                          |  
|Benefit obligation at end of year                                |                                      | $                | 211,530 |                          | $
|                                                                 |                                      |                  |         |                          |  
|Change in plan assets                                            |                                      |                  |         |                          |  
|Fair value of plan assets at beginning of year                   |                                      | $                | 261,089 |                          | $
|Actual return on plan assets                                     |                                      |                  | (32,863 | )                        |  
|Employer contribution                                            |                                      |                  | 4,199   |                          |  
|Plan participants' contributions                                 |                                      |                  | 669     |                          |  
|Benefits payments                                                |                                      |                  | (16,741 | )                        |  
|Plan expenses                                                    |                                      |                  | (511    | )                        |  
|Settlements                                                      |                                      |                  | (13,790 | )                        |  
|Foreign exchange adjustment                                      |                                      |                  | 5,291   |                          |  
|                                                                 |                                      |                  |         |                          |  
|Fair value of plan assets at end of year                         |                                      | $                | 207,343 |                          | $
|                                                                 |                                      |                  |         |                          |  
|Funded status                                                    |                                      |                  |         |                          |  
|Funded status at end of year                                     |                                      | $                | (4,187  | )                        | $
|Unrecognized transition asset                                    |                                      |                  | (695    | )                        |  
|Unrecognized prior service cost                                  |                                      |                  | 5,830   |                          |  
|Unrecognized net loss                                            |                                      |                  | 67,345  |                          |  
|                                                                 |                                      |                  |         |                          |  
|Net amount recognized                                            |                                      | $                | 68,293  |                          | $
|                                                                 |                                      |                  |         |                          |  
|Amounts recognized in the consolidated balance sheet consist of: |                                      |                  |         |                          |  
|                                                                 | Prepaid pension assets               |                  | $       | 81,193                   |  
|                                                                 | Accrued benefit liability            |                  |         | (17,850                  | )
|                                                                 | Intangible asset                     |                  |         | 8                        |  
|                                                                 | Accumulated other comprehensive loss |                  |         | 4,942                    |  
|                                                                 |                                      |                  |         |                          |  
|Net amount recognized                                            |                                      | $                | 68,293  |                          | $
|                                                                 |                                      |                  |         |                          |  

Pension Benefits

Post-Retirement BenefitsWeighted-average assumptions2003

2002

2003

2002Discount rate

6.4
%
6.8
%
6.4
%
6.8
%Expected return on plan assets

9.0
%
10.3
%
N/A

N/ARate of compensation increase

4.0
%
4.0
%
N/A

N/A


In
fiscal 1998, we eliminated subsidized retiree medical coverage for most active employees in the United States. In addition, we limited the increase in future company contributions to
4% for those retirees in the United States that continue to get subsidized coverage. As a result, our assumed

38

---

health-care
cost trend rate is 4%. For our Canadian plans, the increases in company contributions are limited to the increase in the consumer price index. Our health-care cost trend rate
in Canada is 2%.

Assumed
health-care cost trends could have an effect on the amounts reported for the health-care plans. The effects of a 1-percentage-point change in
the assumed health-care cost trends are as follows:

1-Percentage-PointIncrease

Decrease(in thousands)Total of service and interest cost

$
152

$
(176
)Accumulated post-retirement benefit obligation


1,873


(2,070
)


|                                                                 |  | Pension Benefits |         | Post-Retirement
Benefits |  
|---------------------------------------------------------------- |  | ---------------- | ------- | ------------------------ | -
|
|
|Components of net periodic (income) cost                         |  |                  |         |                          |  
|Service cost                                                     |  | $                | 3,446   |                          | $
|Interest cost                                                    |  |                  | 13,506  |                          |  
|Expected return on plan assets                                   |  |                  | (26,207 | )                        |  
|Amortization of transition asset                                 |  |                  | (614    | )                        |  
|Amortization of prior service cost                               |  |                  | 664     |                          |  
|Recognized actuarial (gain) loss                                 |  |                  | 180     |                          |  
|                                                                 |  |                  |         |                          |  
|Net periodic (income) cost                                       |  |                  | (9,025  | )                        |  
|Curtailment loss                                                 |  |                  | 346     |                          |  
|Settlement loss                                                  |  |                  | 4,870   |                          |  
|                                                                 |  |                  |         |                          |  
|Net periodic (income) cost after curtailments and settlementents |  | $                | (3,809  | )                        | $
|                                                                 |  |                  |         |                          |  

The
following information pertains to pension plans with accumulated benefit obligations in excess of plan assets:

Pension Benefits2003

2002(in thousands)Projected benefit obligation

$
18,036

$
17,082Accumulated benefit obligation


17,720


17,024


The
minimum liability recorded for pension plans where the accumulated benefit obligation exceeded the fair market value of assets is as follows:

2003

2002(in thousands)Minimum liability recognized in comprehensive loss

$
(4,942
)
$
(4,210
)Tax benefit


1,864


1,644Minimum liability recognized in comprehensive loss, net of tax

$
(3,078
)
$
(2,566
)


Defined Contribution Plans

Defined contribution plans cover substantially all salaried, sales and certain hourly employees in the United States and Canada. We make contributions equal to
50% of our participating employees' contributions subject to certain limitations. Employer contributions, which are invested in shares of our

39

---

common
stock, were $1.8 million in fiscal 2003, $2.3 million in fiscal 2002 and $2.4 million in fiscal 2001.

Note 17: Multifoods' Business Segments

We manage the company through three operating segments: U.S. Consumer Products, Foodservice Products and Canadian Foods. Our organizational structure is the basis
for reporting business results to management and the segment data presented in this Note. We formed the U.S. Consumer Products business segment in fiscal 2002 as a result of our acquisition of certain
retail brands from Pillsbury and General Mills.

U.S. Consumer Productsmanufactures, markets and sells leading branded consumer foods in the United States. Brands include Pillsbury and
Martha White desserts and baking mixes; Hungry Jack potatoes, pancake mixes and syrup; Farmhouse rice and pasta side dishes; Pet evaporated milk; and Softasilk, Robin Hood, La Piña and
Red Band flour.

Foodservice Productsmanufactures, markets and sells baking mixes and frozen batters, doughs and desserts to foodservice operators and
retail, wholesale and in-store bakeries, primarily in the United States.

Canadian Foodsis a leading manufacturer and marketer of food products in Canada. The company's consumer brands include Robin Hood flour
and baking mixes; Bick's condiments; and Red River and Old Mill cereals. We also are a leading provider of flour, baking mixes and condiments to foodservice operators and other commercial customers.

40

---



We do not allocate interest expense, income taxes or certain corporate expenses to our business segments. The following tables set forth information by business segment:

|      |                        | Net
Sales |       | Operating
Costs |   | Unusual
Items |        | Operating
Earnings |    
|----- | ---------------------- | --------- | ----- | --------------- | - | ------------- | ------ | ------------------ | ---
|
|2003: |                        |           |       |                 |   |               |        |                    |    
|      | U.S. Consumer Products |           | $     | 413.0           |   | $             | (356.6 | )                  | $  
|      | Foodservice Products   |           |       | 228.6           |   |               | (222.4 | )                  |    
|      | Canadian Foods         |           |       | 297.7           |   |               | (275.6 | )                  |    
|      | Corporate              |           |       |                |   |               | (11.5  | )                  |    
|      |                        |           |       |                 |   |               |        |                    |    
|Total |                        | $         | 939.3 |                 | $ | (866.1        | )      | $                  |   
|      |                        |           |       |                 |   |               |        |                    |    
|2002: |                        |           |       |                 |   |               |        |                    |    
|      | U.S. Consumer Products |           | $     | 109.7           |   | $             | (97.4  | )                  | $  
|      | Foodservice Products   |           |       | 215.8           |   |               | (210.8 | )                  |    
|      | Canadian Foods         |           |       | 272.4           |   |               | (249.5 | )                  |    
|      | Corporate              |           |       |                |   |               | (10.9  | )                  |    
|      |                        |           |       |                 |   |               |        |                    |    
|Total |                        | $         | 597.9 |                 | $ | (568.6        | )      | $                  | 0.3
|      |                        |           |       |                 |   |               |        |                    |    
|2001: |                        |           |       |                 |   |               |        |                    |    
|      | U.S. Consumer Products |           | $     |                |   | $             |       |                    | $  
|      | Foodservice Products   |           |       | 196.4           |   |               | (185.7 | )                  |    
|      | Canadian Foods         |           |       | 276.0           |   |               | (246.2 | )                  |    
|      | Corporate              |           |       |                |   |               | (6.7   | )                  |    
|      |                        |           |       |                 |   |               |        |                    |    
|Total |                        | $         | 472.4 |                 | $ | (438.6        | )      | $                  | 3.8
|      |                        |           |       |                 |   |               |        |                    |    

|                            |  | 2003 |      | 2002 |   | 2001
|--------------------------- |  | ---- | ---- | ---- | - | ----
|
|
|U.S. Consumer Products      |  | $    | 7.4  |      | $ | 2.1 
|Foodservice Products        |  |      | 7.7  |      |   | 5.8 
|Canadian Foods              |  |      | 17.7 |      |   | 6.4 
|Corporate                   |  |      | 0.2  |      |   | 0.3 
|                            |  |      |      |      |   |     
|Total continuing operations |  |      | 33.0 |      |   | 14.6
|Discontinued Operations     |  |      | 1.6  |      |   | 5.0 
|                            |  |      |      |      |   |     
|Total                       |  | $    | 34.6 |      | $ | 19.6
|                            |  |      |      |      |   |     

Corporate assets include cash and cash equivalents, U.S. prepaid pension assets, and current and deferred income tax assets.

41

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Note 18: Subsequent Events

On April 1, 2003, we announced that we are taking actions to reduce the cost structure and improve the financial performance of our Canadian Foods and
Foodservice Products businesses. This includes reorganizing our Canadian Foods business to reduce selling and administrative expenses and reducing production at our Foodservice Products plant in
Sedalia, Missouri. These actions will result in a net reduction of approximately 100 full-time positions. We currently expect to recognize an unusual pre-tax charge of up to
$3.5 million in the first quarter of fiscal 2004 and an annual pre-tax benefit of approximately $2 million from these actions, half of which will be recognized in fiscal
2004.

On
April 1, 2003, Fleming Companies, Inc. filed for bankruptcy protection under Chapter 11. Substantially all accounts receivable that were due from Fleming at fiscal year
end were collected as of the date of the bankruptcy filing. We are in the process of assessing whether we will be able to fully collect amounts due from Fleming for sales that we made subsequent to
our fiscal year end. We currently believe that the loss, if any, from our inability to collect amounts due to us will not exceed $2 million.

42

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Note 19: Quarterly Summary (unaudited)

|                    |                        | Net
Sales |       | Operating
Costs |   | Unusual
Items |        | Operating
Earnings |     
|------------------- | ---------------------- | --------- | ----- | --------------- | - | ------------- | ------ | ------------------ | ----
|
|First Quarter2003  |                        |           |       |                 |   |               |        |                    |     
|                    | U.S. Consumer Products |           | $     | 86.0            |   | $             | (75.5  | )                  | $   
|                    | Foodservice Products   |           |       | 58.3            |   |               | (56.7  | )                  |     
|                    | Canadian Foods         |           |       | 66.1            |   |               | (62.3  | )                  |     
|                    | Corporate              |           |       |                |   |               | (4.1   | )                  |     
|                    |                        |           |       |                 |   |               |        |                    |     
|Total               |                        | $         | 210.4 |                 | $ | (198.6        | )      | $                  |    
|                    |                        |           |       |                 |   |               |        |                    |     
|First Quarter2002  |                        |           |       |                 |   |               |        |                    |     
|                    | U.S. Consumer Products |           | $     |                |   | $             |       |                    | $   
|                    | Foodservice Products   |           |       | 52.5            |   |               | (50.9  | )                  |     
|                    | Canadian Foods         |           |       | 59.9            |   |               | (56.0  | )                  |     
|                    | Corporate              |           |       |                |   |               | (2.9   | )                  |     
|                    |                        |           |       |                 |   |               |        |                    |     
|Total               |                        | $         | 112.4 |                 | $ | (109.8        | )      | $                  |    
|                    |                        |           |       |                 |   |               |        |                    |     
|Second Quarter2003 |                        |           |       |                 |   |               |        |                    |     
|                    | U.S. Consumer Products |           | $     | 79.9            |   | $             | (69.6  | )                  | $   
|                    | Foodservice Products   |           |       | 58.3            |   |               | (56.9  | )                  |     
|                    | Canadian Foods         |           |       | 71.9            |   |               | (66.6  | )                  |     
|                    | Corporate              |           |       |                |   |               | (3.7   | )                  |     
|                    |                        |           |       |                 |   |               |        |                    |     
|Total               |                        | $         | 210.1 |                 | $ | (196.8        | )      | $                  |    
|                    |                        |           |       |                 |   |               |        |                    |     
|Second Quarter2002 |                        |           |       |                 |   |               |        |                    |     
|                    | U.S. Consumer Products |           | $     |                |   | $             |       |                    | $   
|                    | Foodservice Products   |           |       | 52.9            |   |               | (51.5  | )                  |     
|                    | Canadian Foods         |           |       | 68.1            |   |               | (62.3  | )                  |     
|                    | Corporate              |           |       |                |   |               | (2.6   | )                  |     
|                    |                        |           |       |                 |   |               |        |                    |     
|Total               |                        | $         | 121.0 |                 | $ | (116.4        | )      | $                  | (0.3
|                    |                        |           |       |                 |   |               |        |                    |     
|Third Quarter2003  |                        |           |       |                 |   |               |        |                    |     
|                    | U.S. Consumer Products |           | $     | 151.8           |   | $             | (128.5 | )                  | $   
|                    | Foodservice Products   |           |       | 59.4            |   |               | (57.8  | )                  |     
|                    | Canadian Foods         |           |       | 90.0            |   |               | (81.1  | )                  |     
|                    | Corporate              |           |       |                |   |               | (2.4   | )                  |     
|                    |                        |           |       |                 |   |               |        |                    |     
|                    | Total                  |           | $     | 301.2           |   | $             | (269.8 | )                  | $   
|                    |                        |           |       |                 |   |               |        |                    |     
|Third Quarter2002  |                        |           |       |                 |   |               |        |                    |     
|                    | U.S. Consumer Products |           | $     | 16.3            |   | $             | (13.5  | )                  | $   
|                    | Foodservice Products   |           |       | 55.2            |   |               | (54.0  | )                  |     
|                    | Canadian Foods         |           |       | 77.0            |   |               | (69.5  | )                  |     
|                    | Corporate              |           |       |                |   |               | (2.7   | )                  |     
|                    |                        |           |       |                 |   |               |        |                    |     
|Total               |                        | $         | 148.5 |                 | $ | (139.7        | )      | $                  | 1.2 
|                    |                        |           |       |                 |   |               |        |                    |     
|Fourth Quarter2003 |                        |           |       |                 |   |               |        |                    |     
|                    | U.S. Consumer Products |           | $     | 95.3            |   | $             | (83.0  | )                  | $   
|                    | Foodservice Products   |           |       | 52.6            |   |               | (51.0  | )                  |     
|                    | Canadian Foods         |           |       | 69.7            |   |               | (65.6  | )                  |     
|                    | Corporate              |           |       |                |   |               | (1.3   | )                  |     
|                    |                        |           |       |                 |   |               |        |                    |     
|                    | Total                  |           | $     | 217.6           |   | $             | (200.9 | )                  | $   
|                    |                        |           |       |                 |   |               |        |                    |     
|Fourth Quarter2002 |                        |           |       |                 |   |               |        |                    |     
|                    | U.S. Consumer Products |           | $     | 93.4            |   | $             | (83.9  | )                  | $   
|                    | Foodservice Products   |           |       | 55.2            |   |               | (54.4  | )                  |     
|                    | Canadian Foods         |           |       | 67.4            |   |               | (61.7  | )                  |     
|                    | Corporate              |           |       |                |   |               | (2.7   | )                  |     
|                    |                        |           |       |                 |   |               |        |                    |     
|Total               |                        | $         | 216.0 |                 | $ | (202.7        | )      | $                  | (0.6
|                    |                        |           |       |                 |   |               |        |                    |     

43

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|                                                      |                         | First Quarter |       | Second Quarter |       | Third Quarter |       | Fourth Quarter |       | Total Year
|----------------------------------------------------- | ----------------------- | ------------- | ----- | -------------- | ----- | ------------- | ----- | -------------- | ----- | ----------
|
|
|Gross profit                                          |                         | $             | 41.9  |                | $     | 16.4          |       | $              | 41.6  |           
|Earnings (loss) from continuing operations            |                         |               | 3.3   |                |       | 0.8           |       |                | 4.3   |           
|Earnings (loss) from discontinued operations          |                         |               | (39.7 | )              |       | 1.3           |       |                | (32.4 | )         
|                                                      |                         |               |       |                |       |               |       |                |       |           
|Net earnings (loss)                                   |                         |               | (36.4 | )              |       | 2.1           |       |                | (28.1 | )         
|Basic earnings (loss) per share of common stock(a):   |                         |               |       |                |       |               |       |                |       |           
|                                                      | Continuing operations   |               |       | 0.17           |       |               | 0.04  |                |       | 0.23      
|                                                      | Discontinued operations |               |       | (2.08          | )     |               | 0.07  |                |       | (1.70     
|                                                      |                         |               |       |                |       |               |       |                |       |           
|                                                      |                         | Total         |       |                | (1.91 | )             |       | 0.11           |       |           
|Diluted earnings (loss) per share of common stock(a): |                         |               |       |                |       |               |       |                |       |           
|                                                      | Continuing operations   |               |       | 0.17           |       |               | 0.04  |                |       | 0.22      
|                                                      | Discontinued operations |               |       | (2.04          | )     |               | 0.07  |                |       | (1.66     
|                                                      |                         |               |       |                |       |               |       |                |       |           
|                                                      |                         | Total         |       |                | (1.87 | )             |       | 0.11           |       |           
|Market price of common stock:                         |                         |               |       |                |       |               |       |                |       |           
|                                                      | Close                   |               |       | 26.49          |       |               | 19.58 |                |       | 20.85     
|                                                      | High                    |               |       | 28.92          |       |               | 20.45 |                |       | 28.23     
|                                                      | Low                     |               |       | 21.00          |       |               | 17.35 |                |       | 20.75     
|                                                      |                         |               |       |                |       |               |       |                |       |           

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44

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Report of Independent Auditors

The
Board of Directors and Shareholders of
International Multifoods Corporation:

We
have audited the accompanying consolidated balance sheets of International Multifoods Corporation and subsidiaries as of March 1, 2003, and March 2, 2002, and the
related consolidated statements of operations, cash flows and shareholders' equity for each of the years in the three-year period ended March 1, 2003. These consolidated financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of International Multifoods Corporation and
subsidiaries as of March 1, 2003, and March 2, 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended
March 1, 2003, in conformity with accounting principles generally accepted in the United States of America.

As
discussed in Note 1 to the consolidated financial statements, effective March 3, 2002, the Company adopted the remaining provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." Effective March 4, 2001, the Company adopted the provisions of SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," and
effective July 1, 2001, the Company adopted the provisions of SFAS No. 141, "Business Combinations," and certain provisions of SFAS No. 142, "Goodwill and Other Intangible
Assets," as required for goodwill and intangible assets resulting from business combinations consummated after June 30, 2001.

/s/
KPMG LLP
KPMG LLP
Minneapolis, Minnesota
April 1, 2003

45

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Report of Management

Management's Responsibility for Financial Statements

Our
consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and include, where required, amounts based
on our best estimates and judgments. We continue to be responsible for the integrity and objectivity of data in these consolidated financial statements, which we seek to ensure through an extensive
system of internal controls. Such controls are designed to provide reasonable, but not absolute, assurance that assets are safeguarded from unauthorized use or disposition and that financial records
are sufficiently reliable to permit the preparation of consolidated financial statements. We recognize that estimates and judgments are required to assess and balance the relative cost and expected
benefits of any system of internal controls.

The
system of internal accounting controls is designed to provide reasonable assurance that the books and records reflect our transactions and that our established policies and
procedures are carefully followed. The system includes written policies and procedures, a financial reporting system, an internal audit department and careful selection and training of qualified
personnel.

|/s/ Gary E. CostleyGary E. Costley Chairman and Chief Executive Officer |  | /s/ John E. ByomJohn E. Byom Senior Vice President, Finance, and Chief Financial Officer
|----------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------

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